USD/JPY slid lower on doubts, concerning Bank of Japan’s policy

On Friday US dollar kept its slide against the Japanese yen, as concerns among market participants towered whether Bank of Japan (BoJ) has been effective enough with its measures to revitalize domestic economy.

During later Asian trade USD/JPY pair fell to a session low at 94.42, after which consolidation followed at 94.90. Support was expected in the range 93.80-94.00, while resistance was to be met at Thursday high, 96.13.

In a media interview on Thursday, the global strategist at investment firm Pierpont Securities Holdings said he expected that USD/JPY had more room to the downside, because Japanese investors did not purchase foreign securities at the pace the Bank of Japan had projected. Market participants do not question Bank of Japan’s efforts, but rather the central bank’s effectiveness in using monetary stimulus in an economy with low interest rates, high debt and almost 20 years of deflation.

Additionally, it became clear, according to the protocol after Bank of Japan minutes on May 21-22nd, that the central bank should vision a 2-year period, during which its unprecedented stimulus measures will be implemented. The main goal is to avoid current government bond market volatility. BoJ Governor Haruhiko Kuroda intends to reinvigorate worlds third largest economy, without causing a jump in bond yield, which could unsettle Japans debt. Yield of Japans 10-year bonds rose to over 1% from the record low level of 0.315% since the beginning of stimulus program in April. Back then BoJ announced its intentions to double monthly bond purchases to over 7 trillion JPY.

Since reaching a 4.5-year low versus the US dollar on May 22, Japanese yen has rallied more than 8%.