The Japanese yen dropped sharply today after Bank of Japan Governor Haruhiko Kuroda signaled that the central bank is going to maintain monetary stimulus for the a long time. Yet the currency quickly reversed its movement, trimming losses against some currencies, while erasing them outright versus others.
Kuroda expressed positive outlook for Japan’s economy in today’s speech, saying that “the economic recovery has taken hold more firmly” and it “has become more sustainable.” Furthermore, the Governor mentioned the danger of keeping monetary policy extremely accommodative for a long time:
The Bank is also aware that prolonged downward pressure on financial institutions’ profits under the continued low interest rate environment could create risks of a gradual pullback in financial intermediation.
Yet he concluded his speech signaling that the BoJ is not going to remove stimulus just yet:
I would like to close my speech by making a commitment that the Bank will firmly support Japan’s economy by persistently pursuing powerful monetary easing.
USD/JPY traded at 114.07 GMT today after opening at 114.01 and rising to the daily high of 114.73. EUR/JPY rallied from 132.40 to 133.11 intraday, but backed off to trade near the opening level later.
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