Speculation about stimulus measures put pressure on yen

Japan economy minister Ishihara was out on the wires last hour via Reuters, commenting on the economic stimulus expected to be on the cards soon. Markets were initially disappointed after announcement from Japanese economic minister failed to provide clarity on the size of the stimulus package and also confirmed a delay in implementation to July-end.

The result of the election to the upper house over the weekend has given Prime Minister Shinzo Abe sufficient backing to implement the “broad, bold measures” that he had announced during the campaign. Speculation about the program’s size runs wild and with this, the risk of any disappointment grows.

Japanese government slashed its 2016 CPI estimates to 0.4 percent from 1.2 percent projected in Jan. and also cut its 2016 GDP forecast to 0.9 percent from 1.7 percent previously estimated. Lower revision of the government estimates further fuel expectations of additional stimulus measures in order to support fragile economy and combat low inflation.

Meanwhile, USD/JPY continues to extend gains above 103 handle, up +0.95percent on the day.