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Weaker yen revitalizes BoJ’s optimism

Bank of Japan (BoJ), which was supposed to be the most wretched central bank of the year 2016, suddenly finds a new wave of optimism in the latest weakening of the Japanese yen. Since Donald Trump’s victory in the US election on November 8th, the yen has weakened more than 11 percent against the dollar, the most among all the major active trading dollar partners. The central bank seems more optimistic at today’s meeting compared to that in September when it was struggling to contain the strength of the yen. The monetary policy statement says, “With regard to the outlook, Japan's economy is likely to turn to a moderate expansion. Domestic demand is likely to follow an uptrend, with a virtuous cycle from income to spending being maintained in both the corporate and household sectors, on the back of highly accommodative financial conditions and fiscal spending through the government's large-scale stimulus measures. Exports are expected to follow a moderate increasing trend on the back of an improvement in overseas economies.”

The central bank maintained its stance of continued monetary easing using the "Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control," unless the 2 percent inflation goal is achieved.

The yen weakened post-BoJ monetary policy and currently trading at 117.8 per dollar.

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