USD/JPY on six-week highs following Bank of Japan’s statement

US dollar advanced to its highest level in six weeks against the Japanese yen on Thursday, following the decision by Bank of Japan to leave its monetary policy course unchanged and amid expectations of a possible scale back of Federal Reserve Banks easing program this month.

USD/JPY hit a session high at 100.08 at 7:35 GMT, after which the pair consolidated at 99.98, gaining 0.23% for the day. Support was expected at September 2nd low, 98.35, while resistance was to be seen at July 25th high, 100.42.

Bank of Japan (BoJ) announced today that as a result of an unanimous vote, the benchmark interest rate and the scale of monetary stimulus were left unchanged in consonance with expectations. The central bank revised up its economic outlook, saying that economy was moving gradually towards recovery. The bank will continue its operations on the money market in order to achieve an annual growth by 60-70 trillion JPY of countrys monetary base. Asset purchases will be proceeded in line with banks decision in April. BoJ also added that it will continue increasing the amount of government bond purchases, reaching an annual level of 50 trillion JPY.

In his statement earlier today, BoJ Governor Haruhiko Kuroda said that the increase in tax on sales would not obstruct economic recovery and inflation rate. He also did not see a necessity to introduce changes in monetary policy at this present moment, while Bank of Japan was capable of coping with the weak economic growth, caused by sales tax increase. The Governor outlined the banks immediate reaction with fiscal measures, in case that new higher taxes led to slowing recovery. Kuroda expected that Japans economic growth may outperform even with the imposed higher sales tax. Last but not least, he added that consumer price index in the country was gaining in line with banks expectations.

In the mean time, the greenback was receiving support after the upbeat ISM manufacturing activity report on Tuesday, which reinforced the view of a possible pare back of Federal Reserve’s stimulus program at its policy meeting this month.

The most recent survey on economic conditions in the United States by the Federal Reserve was published yesterday. The Beige Book report said that economic activity in the country neither strengthened at a high pace, nor slowed down. The report also showed a continuing rise in US employment, while remunerations and prices remained stable in consonance with projections. Overall growth was defined as weak to moderate, as shown in the preceding report on July 17th, but however, at present some positive changes were observed. Demand for automobiles increased, as well as demand for other consumer goods, which may speak of a continuing revitalization in US housing sector.

Elsewhere, the yen was steady against the euro, with EUR/JPY ticked down 0.02% to trade at 131.71 at 9:57 GMT.