18 Feb 2014
Flash: JPY weakness temporary? - BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, argued that the recent measures by the BoJ could weaken the JPY in the short-term.
Key Quotes
"The yen has continued to weaken in the Asian trading session with weakness accelerating after the BoJ announced that it had tweaked monetary policy. The Policy Board decided to double the scale of i) the Stimulating Bank Lending Facility and ii) the Growth-Supporting Funding Facility and to extend the application period of these facilities by one year."
"Both facilities were due to expire shortly which prompted the BoJ to act today. Under the SBLF, financial institutions will now be able to borrow funds from the Bank up to an amount that is twice as much as the net increase in their lending."
"While under the GSFF, the maximum amount of the Bank’s fund-provisioning will be doubled to JPY7.0 trillion.Both facilities will also allow financial institutions to be able to borrow funds at a fixed rate of 0.1%/annum for an extra year up to four years."
"The BoJ expects that these enhancements will encourage bank lending and strengthen foundations for economic growth. In contrast, the main part of the BoJ’s monetary easing operations was left unchanged with the BoJ maintaining its plan to increase the monetary base by an annual pace of about JPY60-70 trillion."
"The BoJ still described the Japanese economy as recovering moderately which is expected to continue as a trend. The BoJ also acknowledged again that the annual rate of core inflation is around 1.25% where it is likely to remain around for some time."
"Overall, the policy tweaks announced from the BoJ are unlikely to significantly ease monetary conditions in Japan in the near-term and will weigh only modestly upon the yen. The accelerated yen sell off overnight in part reflects reinforced investor expectations that the BoJ may deliver more significant monetary easing later this year. It also follows closely the release of the weaker than expected Japanese Q4 GDP report."
Key Quotes
"The yen has continued to weaken in the Asian trading session with weakness accelerating after the BoJ announced that it had tweaked monetary policy. The Policy Board decided to double the scale of i) the Stimulating Bank Lending Facility and ii) the Growth-Supporting Funding Facility and to extend the application period of these facilities by one year."
"Both facilities were due to expire shortly which prompted the BoJ to act today. Under the SBLF, financial institutions will now be able to borrow funds from the Bank up to an amount that is twice as much as the net increase in their lending."
"While under the GSFF, the maximum amount of the Bank’s fund-provisioning will be doubled to JPY7.0 trillion.Both facilities will also allow financial institutions to be able to borrow funds at a fixed rate of 0.1%/annum for an extra year up to four years."
"The BoJ expects that these enhancements will encourage bank lending and strengthen foundations for economic growth. In contrast, the main part of the BoJ’s monetary easing operations was left unchanged with the BoJ maintaining its plan to increase the monetary base by an annual pace of about JPY60-70 trillion."
"The BoJ still described the Japanese economy as recovering moderately which is expected to continue as a trend. The BoJ also acknowledged again that the annual rate of core inflation is around 1.25% where it is likely to remain around for some time."
"Overall, the policy tweaks announced from the BoJ are unlikely to significantly ease monetary conditions in Japan in the near-term and will weigh only modestly upon the yen. The accelerated yen sell off overnight in part reflects reinforced investor expectations that the BoJ may deliver more significant monetary easing later this year. It also follows closely the release of the weaker than expected Japanese Q4 GDP report."