Yen Advances as Bank of Japan Refrains From Adding to Stimulus

  • Attention turns to whether Kuroda will ease further on Oct. 30
  • Outlook not bad enough to justify further stimulus: RBS

The yen rose for a second day against the dollar after the Bank of Japan refrained from adding to its already unprecedented monetary stimulus at the end of a two-day policy meeting.

Japan’s currency also gained for the first time in five days versus the euro after BOJ Governor Haruhiko Kuroda kept his pledge to expand the monetary base at an annual pace of 80 trillion yen ($666 billion). All but two of 36 economists surveyed by Bloomberg earlier this week forecast the policy would be unchanged, while 15 predicted the central bank would expand stimulus at its meeting on Oct. 30. At a briefing in Tokyo after Wednesday’s decision, Kuroda said the BOJ will keep easing until inflation is stable.

“Today’s meeting showed the BOJ will not be swayed into action easily,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “Receding expectations for BOJ action will gradually weigh on the dollar.”

The yen strengthened as much as 0.4 percent against the U.S. currency and was up 0.1 percent at 120.07 per dollar as of 6:56 a.m. New York time. It appreciated 0.3 percent to 135.10 per euro, while Europe’s shared currency weakened 0.2 percent to $1.1251.

The BOJ’s key price gauge fell in August, along with industrial production, raising concern Japan may have fallen back into a recession in the third quarter. While more than a third of economists surveyed by Bloomberg said Kuroda may be able to avoid increasing stimulus altogether, a larger number expected him to boost asset purchases at the next meeting of his policy board.

BOJ Wary

“We keep our view of no change as the economic outlook has not deteriorated sufficiently enough to justify further easing and as the BOJ is wary of its large asset purchases hitting limits on its bond-buying in the next couple of years,” said Mansoor Mohi-uddin, a senior markets strategist at Royal Bank of Scotland Group Plc in Singapore. “We thus continue to like the yen.”

Kuroda said last week it was hard to see the economy contracting in the three months ended September, and that the combination of high corporate profits and a tight labor market augured well for stronger inflation.

“The dollar’s downside is limited by expectations for an additional easing on Oct. 30,” said Jun Kato, senior fund manager in Tokyo at Shinkin Asset Management Co. “But the statement showed little change and if Kuroda maintains his tone, the probability of easing on Oct. 30 will be low. ”

(An earlier version of this story was corrected to amend the level of the euro against the yen.)

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