Japanese Yen (JPY) Exchange Rate Advances against Sterling, US Dollar after BoJ Decision
The Japanese Yen (JPY) exchange rate strengthened against peers like the British Pound (GBP) and US Dollar (USD) during the local session as the Bank of Japan refrained from introducing additional stimulus.
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As forecast by economists, the BoJ voted to continue with its course of increasing base money by 60-70 trillion Yen on an annual basis.
After years of persistent deflation, the central bank believes that price gains are finally on track to meet the BoJ’s 2 per cent target and it seems unlikely that any additional measures will be taken until at least July.
However, several disappointing economic reports were released in Japan overnight.
Industrial production in the nation increased by 0.3 per cent in March, month-on-month. While this was an improvement on February’s 2.3 per cent decline, it was shy of the 0.5 per cent gain expected.
On the year, industrial production rose by 7.0 per cent – short of the 7.2 per cent target.
Meanwhile Japan’s Markit manufacturing PMI came in at 49.4, down from 53.9 the previous month and below the 50 mark separating growth from contraction.
The fall in output was the steepest since the close of 2012 and new orders dropped.
In a statement issued with the data economist Amy Brownbill stated; ‘As was expected, the implementation of the increase in sales tax negatively impacted on Japanese manufacturing companies.
‘Output and new orders both fell for the first time in 14 months. [However] growth in employment was the sharpest seen since February 2007.
‘Therefore it will be interesting to see whether the increase in the sales tax will continue to have a negative impact on Japanese manufacturing activity in the future months or whether the effects will only be short lived.’
Domestic housing starts fell by 2.9 per cent in March, year-on-year. A decline of 2.7 per cent had been expected.
Construction orders tumbled by 8.8 per cent last month, year-on-year, a sharp turnaround from February’s 12.3 per cent gain.
Finally, a gauge of small business confidence slipped from 53.5 to 45.4 this month.
Despite this stream of disappointing economic data for Japan the Yen held gains against the US Dollar and was stronger against Sterling.
However, if US growth figures deliver a positive surprise the Yen’s advance could be reversed.
Economists expect today’s US growth report to show expansion of 1.4 per cent in the first quarter of 2014.
The Federal Open Market Committee rate decision could also affect the Yen’s exchange rate as trading continues.
The US Dollar is currently trading against the Japanese Yen in the region of 102.4800 and the Pound is currently trading against the Yen in the region of 172.2320.