Global macro overview for 31/10/2017:
In the Monetary Policy Statement, BoJ Governor Kuroda said that debating stimulus exit would send a wrong message to the markets. Moreover, he noted that the Japanese economy is doing well, but the inflation expectations and prices remain weak, so BoJ wants inflation to hit the 2% price target at earliest possible date. The GDP forecast was slightly increased to 1.9% from 1.8% for this year and left unchanged at 1.4% for the next year. Moreover, the next year’s inflation forecast was trimmed to 1.4% vs. 1.5% last time.
The Bank of Japan remains faithful to its policy of loosening and maintaining the yields of ten-year bonds at zero. The decision was made by 8-1 vote. Nevertheless, the new BoJ board member, Kataoka, dissented again, stressing the need for new measures to achieve the 2% inflation target. Kataoka said: «if there were a delay in the timing of achieving the price target due to domestic factors, the BoJ should take additional easing measures.» Kataoka also proposed that BoJ should also target to keep 15-year yield at «less than 0.2%», compared with market expectations of 0.307%.
Let’s now take a look at the USD/JPY technical picture on the H4 time frame after the news was released. The market was rejected at the recent high at the level of 114.47 and broke below the technical support at the level of 113.43, which is now being tested from below. Any breakout below the level of 112.94 will directly reveal the level of 112.27 for a test.