Forex News
January 22, 2013 @ 10:03 am

Yen rebounds after Bank of Japan delays asset purchases until 2014

The yen gained against the dollar and most other major counterparts in early Tuesday trading after the Bank of Japan made announcements regarding its new policy measures.

The central bank concluded a two-day policy meeting  today and announced that  it will adopt new measures to fight the threat of deflation and generate growth in the stagnant Japanese economy. It mentioned more quantitative easing by expanding its asset purchase program.

“In order to overcome deflation early and achieve sustainable economic growth with price stability, the Government and the Bank of Japan will strengthen their policy coordination,” the Bank of Japan said in a statement today. The central bank said it will pursue monetary easing and aim to achieve the 2 percent inflation target at “the earliest possible time.”

Upon initially hearing this, yen was sold off. However, the currency soon rebounded after investors realized the unlimited asset purchases will not begin until 2014.

The BOJ said it will buy about 13 trillion yen ($146 billion) in assets per month from January 2014 and set a 2 percent inflation target.

This delay in policy disappointed investors  which had expected another incremental increase in its 101 trillion yen ($1.12 trillion) asset-buying scheme. The delay until the quantitative easing measures kick in will dull the weakening effect these measures usually have on the currency and  saw the yen jump higher against the dollar.

“Overall, the size of the program has not been raised as hoped,” said Greg Gibbs, a Singapore-based senior currency strategist at Royal Bank of Scotland Group Plc. “That is risking disappointment and causing a downward correction in dollar-yen. The BOJ statement disappoints on the pace of purchases in 2013, which has been maintained.”

The yen reversed early losses against the dollar to gain 0.4 percent to 89.22 per dollar at 7:05 GMT. This move comes after an earlier weakening as much as 0.6 percent. The USDJPY hit  90.25 yesterday, the highest since June 23, 2010. Japan’s currency also eventually gained against the euro to below 118.40 compared to 119.30 yesterday.

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