BoJ ends JPY weakness

The governor of the Bank of Japan (BoJ) Haruhiko Kuroda just had one of his regular hearings in front of Parliament. The headlines that came over the news tickers all went in the same direction: the effectiveness of monetary policy is limited, it is now down to fiscal policy. 

Inflation is moving in the right direction and of course they were willing to take further action should that be necessary. However, principally this all sounded as if nothing in particular was planned at the moment. And the market? Hardly reacted at all to any of this. Until Kuroda pointed out that he struggled to see a further fall in the real effective exchange rate of the yen. 

"At last the yen reacted as one would expect if the BoJ promises not to do anything at all for the time being: it appreciated. Kuroda is likely to wonder very quickly now whether this really was the signal he wanted to send out to the market, as inflation does not seem to be on a path towards the 2% inflation target. And in the absence of further yen weakness it will be difficult to get there. The BoJ should urgently rethink its priorities", suggests Commerzbank.