Is Japan able to survive the struggle?

July 27, 2016

On Tuesday the Japanese Yen suddenly surged making it the week’s high. The jump in the markets hopes was caused by rumors of the BoJ releasing a long-speculated gyrate stimulus.

The Bank of Japan is going to announce the Monetary Policy updates on Friday. It is expected that BoJ will inject about 6 trillion Yen ($56 billion) into the Japanese financial markets to suppress the ongoing deflation and weakened national currency. As the local newspapers wrote then the size of the easing program could not be sufficient anymore in order to liven the market hopes. Investors were expecting at least stimulus worth of 10-20 trillion Yen ($95.91-$191.82 billion), but the lack of made the investors flee from local equity-based companies.

The USD/JPY pair soared to 104.10 level on the news. The local stock index Nikkei 225 closed with a 1.43% decline at 16, 383.04. The pair bounced from 100.50 psychological level it reached on 8th of July to a 107.49 peak last week. TheNintendo shares dropped by 17.7%, which was the biggest decline since October 1990, leaving the stock down by 5,000 yen. This was set to give an even a further kick to the Japanese economy, but analysts believe the market “overreacted” to the overall situation. Not all experts are happy as they feel that on Friday the Bank of Japan is going to extend the stance of the easing program and drive the rates even deeper into the negative zone, as all previous measured failed to curb the deflation and bolster the economic upturn of the country.

All of Japan is living in the slow wait for the BoJ news about the hoped economic boost with the beneficial easing measures.

The British pound fell after being paired against the US Dollar and it stuck to the level of 1.3050. Slack in the US Dollar ahead of FOMC decision helped the Pound to come back to its expansionary zone as the pair jumped to 1.3150 level as of 09:11 GMT. The US policymakers do not expect any rate cuts in July, but they will be careful regarding the future rate hikes in order to estimate the future recession risks.

According to The Financial Times, Martin Weale a member of BoE, who is the man behind the easing delay, backed off from his former stance on the subject. Now calling for the need of an urgent monetary stimulus.

The Dollar index which rose to the four-month high on Tuesday on a 97.62 level, turned to a sudden slump on Wednesday as large investors quit US currency ahead of uncertainty related to the FED final statements regarding the further monetary policy, USDX -0.33% at 96.96 level.

Oil prices extended declines with US Oil tumbling below $43 and Brent falling below $45 mark. The constant decline has sent the oil prices to a three-month low. Crude prices are under pressure from the excess supplies and low appeal to risk assets. Especially before the crucial monetary decisions in US and Japan. Brent crude dropped 2.1% to $44.75, its lowest level since 10 May.

Gold advances 0.18% as a safe haven to 1.329.55 level.

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