The yen sharply strengthened

June 10, 2015

Who would have thought that for the correction of the yen from the multi-year lows anti-inflation comments will be enough.

On Wednesday, the Japanese yen sharply strengthened in trading. Correction of the long-term low started on Monday, but enthusiasm by itself was not enough. And this morning there was a reason to continue selling in the USD/JPY pair.

A member of the Board of the Bank of Japan Mr. Sato said on Wednesday that inflation at 2% - is not necessarily the goal in future years. According to him, the delay in the implementation of this goal does not pose any major problem. In addition, there is no conclusive evidence that inflation expectations will rise.

Sato also said that the current monetary policy should not be reviewed in an automated manner only because the Central Bank’s desired period of two years has passed.

The speech was convoluted, that's true, but the market realized what it wanted to understand for a long time: after two years, which the Bank of Japan has taken as a provisional guideline for the implementation of monetary policy, no one will turn off the QE program quickly and painfully. The economy was "injected" with too much money to give up the inflation target.

But in addition, it is necessary to understand that to achieve the inflation target - is only half the battle, the most simple and easy. The hardest thing is to keep inflation at the proper level. Preferably, with a healthy mechanism in the form of consumer demand and the growth of producer price indices.
 
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