The anticipation of aggressive action at today’s emergency BOJ meeting was more impactful on USD/JPY than the rather tepid move into quantitative ease undertaken by the BOJ. The Bank is offering fixed rate repos to the banking system for three months at 0.1%. This is along the lines of the non-standard measures that the ECB has been using in the wake of the credit crisis.
If the market takes this move as a first step, USD/JPY could extend its rebound. If the feeling is “that’s all ya got?”, then USD/JPY could resume its slide. Price action will largely color how the market interprets the BOJ’s move. A sustained break above 87.50 will signal a medium-term bottom for USD/JPY. Continued failures at that level will keep downward pressure intact.
USD/JPY trades now at 86.85.
