It is reported that the Bank of Japan decided to abstain from changing its monetary policy during the latest meeting this month. At the same time, the central bank left its economic predictions unchanged after increasing the consumer tax while expecting stronger data.
In particular, the Bank of Japan left the expansion of its monetary base unchanged at 60-70 trillion yen per year. The decision matched analyst expectations. Therefore, the BOJ decided to abstain from expanding its stimuli since the Japanese economy seems to be showing signs of recovery, thereby reassuring the central bank even after the recent tax hike. The tax hike is currently having less impact on the economic recovery than expected, so there is no need for expansion.
At the same time, the bank of Japan is pretty sure that the rate of inflation is going to reach the expected target of 2%. That is why traders and investors are not as sure about further easing as they used to be.
The Bank of Japan seems to be betting on price growth, which is likely to take place after the consumer tax hike, rather than expecting negative consequences of the fiscal tightening. So, the BOJ is unlikely to continue easing the monetary policy till late 2014, especially if the national economy manages to withstand the deterrents and keeps recovering, Market Leader reports
USDJPY Prospects
Meanwhile, the Japanese Yen is still trading within he scope of a mid-term trend. This means that USDJPY is still developing a downswing represented by wave 3/C of level Daily 2 or higher, Masterforex-V Academy reports.
On May 22nd, the currency pair completed sub-wave a(C )/C and is currently testing the downward MF sloping channel. If the channel is broken, this will confirm that the wave is completed. The downtrend of USDJPY will be completed if the price breaks above 102.11. Alternatively, a break below 100.81 will resume the move. The closest levels of support are 100.75 as well as 100.66/64, 100.46.
