According to the IMF's expectations, the Bank of japan is likely to preserve its monetary easing program in order to give the Japanese Prime Minister more time to complete his own plan aimed at backing the economic recovery in the country.
The Japanese central bank set a goal. The goal is aimed at hitting the 2% inflation target by late 2014. As for other steps, the central bank hasn't mentioned any of them so far. This ended up with the IMF urging the BOJ to reveal its near-term monetary plans and to be more transparent in future Market Leader reports.
In April 2013, the Bank of Japan launched a new program aimed at purchasing bonds, thereby triggering a decline in the value of the national currency – the Japanese Yen – coupled with stronger inflation expectations.
It is worth reminding you that some of the BOJ members hinted at the BOJ's intension to continue the easing program even in 2015 and maybe later. The level of inflation in Japan is close to setting a new record. Despite the recent consumer tax hike and household spending cuts, the rate of inflation in Japan in April reached the highest level in 23 years!
The CPI (excluding food) increased by 3,2% m/m and 1,3% y/y during the reporting period despite the fact that the inflation target set by the Bank of Japan was 2%. The Japanese motor industry has been growing steadily for 8 consecutive months.
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As of the Japanese Yen, the currency keeps on trading within the scope of a price range against the US Dollar after breaking the MF sloping channel.The closest levels of support are 100.81 and 100.74, the local lows, while the closest levels can be found at 104,08 (see the chart below). The price reaction to these levels will clarify the near-term prospects of the currency pair.
