BoJ is not withdrawing its massive stimulus program anytime soon!
While after last week's BoJ meeting, market participants and investors started speculating about reducing the central bank's support level, in his Monday speech, Kuroda mentioned that last week's announcement was not a prelude to withdrawing BoJ's massive stimulus program.
The Bank of Japan widened the yield curve on long-term bonds from 0.25% to 0.50% but maintained the yield target at 0%. That made the Japanese Yen gain almost 5% against the USD before its reverse after Kuroda's speech, where he played down the Yield Curve move.
Instead of changing the policy rate, BoJ plans to increase wages to hit its 2% inflation target in a "sustainable and stable manner" and continue the support by controlling the Yield curve.
On the other hand, continuing the ultra-easing policies for the long term means more damaging effects on the economy, such as blunting market functions, excessive yen weakening, and looser fiscal discipline, at the expense of increases in real income. Some analysts and economists believe it is time to raise the rates and support the Yen is time.
BoJ governor Haruhiko Kuroda retires in April, and investors expect a policy shift with his alternative. So we can still count on Yen's strengthening despite the recent soft recovery after December 20's reinforcement. From the technical point of view, it also USDJPY moves in a clear downtrend in its daily chart, especially under 134, and the OBV trend line has confirmed it.
