Talking Points:
- The Bank of Japan’s April policy meeting minutes evinced no hurry to alter accommodative settings
- It would have been unexpected if they had, but still, markets had the status quo underlined for them again
- USD /JPY ticked up after the release, but didn’t stay up for long
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The Japanese Yen slipped a little against the US Dollar Wednesday, but soon recovered, after he release of minutes from the Bank of Japan’s April monetary policy meeting.
That took place on the 26th and 27th of that month and resulted in no change to Japan’s extraordinarily accommodative policy settings. The minutes had no new tale to tell investors. However, from the point of view that they once again illustrated a central bank with no intention of unwinding easy policy, they reinforced market perception.
Bank of Japan Governor Kuroda has been under some pressure to reveal how the BoJ might in time unwind some of the enormous balance sheet the BoJ has accumulated through stimulative bond buying. The sheet has reportedly grown to more than JPY500 trillion ($4.49 trillion) at the end of May, a similar size to Japan’s total annual Gross Domestic Product
However, he has declined to go into details beyond assuring markets that unwinding can be done without undue disruption. And, with Japanese annualized consumer price inflation at a miserly 0.4%, it seems unlikely that any unwinding will happen soon. The BoJ’s target is 2%. The minutes showed little appetite to curtain bond buying at this point, with only one member saying that it should be incrementally reduced.
The minutes said that risks to Japan’s economy were skewed to the downside overall, while inflation remains weak. On a brighter note, they said that BoJ rate-setters expected industrial production gains to increase and that exports should continue to show solid gains.
USD/JPY ticked up but soon came back down again after the minutes, which in any case may look rather historical now. Yen-watchers are on alert for what is sure to be a more timely snapshot of BoJ thinking. Governor Kuroda will speak in Tokyo at 06:36 GMT Wednesday.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
