The currency markets are awaiting the release of the Bank of Japan decisions tomorrow, Tuesday, which include the interest decision, the monetary policy statement, and the bank’s economic expectations, in addition to the press conference of the Governor of the Bank of Japan, amid expectations that interest will remain unchanged, but will monetary policy change, and the bank is heading to strengthen monetary stimulus During the coming period, especially with the continuation of the outbreak of the new Omicron mutant, and how will Kuroda’s statements affect the Japanese yen’s trading against other currencies?
First: A look at the economic situation inside Japan:
During the past period, many economic data were released that may strongly affect the decisions of the Bank of Japan, especially the data of the Bank of Japan’s core inflation index, which rose by 0.8% at the end of last December, higher than the market expectations of a growth of 0.5%, and higher than the previous reading, which was recorded A growth of about 06% at the end of November, which in turn will affect the bank’s decisions this month.
Also, the unemployment data came negative at the end of last December, as unemployment rose to 2.8%, while expectations indicated that unemployment would remain stable at 2.7%, as happened last month. Therefore, this data will have a clear impact on the Bank of Japan’s upcoming decisions tomorrow.
Second: The high frequency of Corona injuries and its impact on the decisions of the Bank of Japan:
During the last period, the frequency of Corona virus infections inside Japan rose strongly amid the outbreak of the omicron mutated, as news reports stated that the Japanese government intends to take new restrictions to confront the outbreak of the new Corona virus inside the country, as the city of Tokyo is scheduled to declare a state similar to a state of emergency in light of the rise The large number of infections with this dangerous coronavirus.
And Japanese Prime Minister Fumio Kishida said today, Monday, that the first priority of the Japanese government is currently responding to the repercussions of the Corona virus and its new mutant, Omicron. Prime Minister Kishida added that the shortage of hospital beds should be avoided no matter how evolving the situation, and stressed that the Government of Japan will be keen to provide booster doses of vaccine for the elderly first and then for the rest of the ages within about two months, and therefore this increase in the rate of infections would strongly affect the health of the population. Bank decisions.
Third: Decision-makers’ statements and hints about the future of monetary policy:
Earlier, the Governor of the Bank of Japan, Kuroda, stated that the Central Bank of Japan will direct its policies during the coming period as usual, but at the same time in line with important economic developments, as Japan’s upcoming policies will depend on developments at the internal level in Japan or the external level in the whole world, Especially influential economies.
At the same time, the Governor of the Bank of Japan expected the consumer price index to rise gradually, in light of the rise in energy prices, and his expectation that the Japanese economy would recover in the coming period with the decline in the effects of Corona. Kuroda stressed that the Japanese financial system is stable, and that the acceleration of consumer price inflation in Japan will be gradual due to the rise in energy prices. He stated that the Bank of Japan is watching the impact of the Corona virus, and will not hesitate to ease monetary policy further if necessary.
Fourth: What is expected of the Bank of Japan’s decisions and their impact on the Japanese yen?
Expectations indicate that the Bank of Japan may move to maintain interest rates and monetary policy without adjustment, but there are expectations that the Bank of Japan will revise its inflation expectations for the 2022-2023 fiscal year to rise from the current rates, as the Bank is likely to raise its inflation expectations to exceed 1% inflation in next fiscal year. Also, the Bank of Japan is expected to indicate that the economy will grow by 2.9% next fiscal year after growing by 3.4% this year.
Thus, the markets will monitor the monetary policy statement, and the economic outlook, in addition to observing the tone of the Bank of Japan Governor, Kuroda’s statements, during the press conference. movements of the Japanese yen.
While on the other hand, the bank may tend to maintain monetary policy without modification, and stress that the economy was severely damaged during the past period by the repercussions of the Omicron mutator, and that it may enhance monetary easing if necessary, and this scenario, if it is achieved, would have a negative impact. The Japanese yen is traded in the currency markets.
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