USD/JPY struggles to find stability following BoJ lending update
The USD/JPY found itself trading down 0.25% after the Bank of Japan unveiled an additional US$300 million in financial aid.
The USD/JPY (大口） forex pair was down 0.25% after the Bank of Japan (BoJ) committed an additional 45 trillion Japanese yen (US$300 million) to helping struggling businesses tide over the Covid-19 period.
Japan’s central bank to pump in an extra US$300 million in loans
On Tuesday 16 June 2020, Japan’s central bank announced that an additional fiscal stimulus of up to 110 trillion Japanese yen (US$1 trillion) will be made available, if the maximum amount of loans is approved via its various financing schemes. This is larger than the 75 trillion Japanese yen emergency package – the government’s second this year – unveiled in May 2020.
The BoJ also left interest rates unchanged following an 8-1 vote in favour of the status quo. Additionally, Japan’s central bank has also decided to let its yield curve control for 10-year Japanese government bonds (JGB) stay at -0.1% for short-term interest and 0% for long-term rates.
The central bank revealed that it will continue to purchase back more JGBs in order to pump more liquidity back into the economy, during a crisis that it has dubbed as ‘extremely severe’.
‘Given markets have calmed down and the economy appears to be bottoming out, there’s no reason for the BOJ to take action anytime soon,’ Hiroshi Shiraishi, senior economist at BNP Paribas Securities, told Reuters after the announcement was made.
‘Fiscal policy will play a main role in responding to the virus fallout, so the central bank will continue to indirectly help the government by keeping borrowing costs low.’
Are you looking to trade the USD/JPY (大口） and other forex pairs without having to buy and sell the actual assets? You can explore CFD trading by signing up for an IG account.
The BoJ is one of many major central banks that have unveiled upwards of US$1 trillion in economic stimulus as a response to the coronavirus pandemic in the last four months.
On Monday 15 June 2020, US central bank – the Federal Reserve – said it will start purchasing corporate bonds on Tuesday through the secondary market corporate credit facility (SMCCF). US President Donald Trump was also reportedly mulling the possibility of a US$1 trillion infrastructure spending plan to boost the economy.
‘Broad situation remains uncertain’: IG analyst
Following the update, the USD fell against the Japanese yen to ¥107.300. As at 09:00 GMT on the same day, the USD/JPY has retraced some of those losses, and is now back above at ¥107.430.
Looking ahead, IG Asia market strategist Pan Jingyi wrote that ‘the broad situation…remains one of high uncertainties, one shared by the BoJ’.
She added that this could also affect equities, with upward price adjustments and possible deviations to be expected in the coming days.
How to trade forex with IG
Are you feeling bullish or bearish on USD/JPY (大口） and other major currencies. Either way, you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's world-class trading platform in a few easy steps:
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
React to global volatility
Market volatility continues as coronavirus dominates the global agenda. Trade with us to take advantage of:
- Tight spreads – from just 1 point on major indices, and 2.8 on US crude
- Guaranteed stops – they’re free to use, and you’ll only pay a small fee if they’re triggered
- Round-the-clock assistance – our highly-skilled team are on hand to support you
Live prices on most popular markets
- Forex
- Shares
- Indices
Prices above are subject to our website terms and agreements. Prices are indicative only
