After weeks of speculation, traders finally got the reports on BoJ’s policy for the next quarter. Their reaction has been sharp. Yen lost all the gains it had made in the last few weeks as investors looked optimistically at BoJ’s new Governor Kazuo Ueda. However, the governor has continued Japan’s long-standing loose monetary policy.
There are still many policy reports to be seen. This includes the Bank of Japan’s longer-term interest rate target and the Yield Curve Control (YCC) measures it will take to achieve those targets. Under the YCC method of stimulating the economy, the central bank declares an interest target and then buys as many bonds as required on the open market.
The graph below shows the expanding balance sheet of BoJ Japanese Government Bond purchases. Markets hold a short position on Yen
The data from the USA is still to be released. The Federal Reserve has not released any statement in recent times. The markets are eagerly waiting to see positive signs of recovery in the American economy. They are looking at vital data indicators like the US GDP, durable goods orders, inflation rate and the core PCE. A positive sign in the American economy could stimulate the market. For now, investors are holding a short position on Yen. According to an estimate by IGCS, 59% of traders are holding short positions in the market.
