The Japanese yen is recording modest gains against its currency counterparts on Thursday. The yen is finding support on the Bank of Japan (BoJ), leaving its ultra-loose monetary policy intact, as well as pledging to coordinate with new Prime Minister Yoshihide Suga. But with disappointing economic data and a potential inflationary crusade, are the yen’s days numbered.
On Thursday, the central bank kept its short-term benchmark interest rate at -0.1%, while also continuing to purchase more government and corporate bonds. The BoJ also kept the benchmark 10-year government bond yield at 0%.
BoJ Governor Haruhiko Kuroda is optimistic about the world’s third-largest economy moving forward, but he did confirm that the central bank is willing to employ the necessary monetary stimulus measures should the country slide deeper in an economic downturn.
Japan’s economy has started to pick up with economic activity resuming gradually, although it has remained in a severe situation due to the impact of the novel coronavirus at home and abroad.
He added that the central bank would start to coordinate with Prime Minister Suga, who recently took office after Shinzo Abe officially stepped down. Suga is seen as a head of state who will continue most of Abe’s policies, so not too many investors and analysts are concerned over an ideological revolution.
The BOJ will continue to solidly cooperate with the government as it manages policy. The need for deregulation is widely recognized and the BOJ stands ready to continue to provide a sort of safety net through monetary easing.
As FX Daily Report reported this week, economic data was disappointing. Japan recorded its fifth consecutive month of a trade surplus, but imports and exports were still disappointing. Exports declined by 14.8% in August, slightly better than the market forecast of -16.1%. Imports plummeted 20.8%, worse than the median estimate of -18%.
The developments came after it was reported that industrial production plunged 15.5% year-over-year in July, and the Tertiary Industry Index slipped 0.5% in July. Capacity utilization did jump 9.6%.
The USD/JPY currency pair dipped 0.11% to 104.84, from an opening of 104.95, at 17:02 GMT on Thursday. The EUR/JPY dropped 0.06% to 123.94, from an opening of 124.01.