Andy Ji, FX Strategist at CBA, on USD/JPY, EUR/JPY and BOJ's asset-purchase programme

Source: Dukascopy Bank SA
© CBA
How would you evaluate the current performance of USD/JPY and EUR/JPY?
I would say that USD/JPY has been in a pretty rangy trading for quite a while, while EUR/JPY is more or less driven by the move from the Euro side. Thus, with regards to Japan's currency, currently there are not much of the movements in the Yen.

The Bank of Japan expanded its asset-purchase programme for the second time in two months. The fund will be increased by 11 trillion yen ($138 billion) to 66 trillion yen. What do you think about the BOJ's stimulus package?
I personally did not really see the need of adding more stimulus packages, as the BOJ had not really utilized other stimulus. The asset purchase programme, which Japan had in place, had been expanded by the Bank of Japan at the previous meeting. However, the BOJ had not fully utilized the whole asset-purchase programme. Therefore, I do not think there is going to be much of an impact.

The BOJ is expected to continue powerful monetary easing until 1 per cent inflation level is achieved.
Do you think the BOJ will reach the goal in the upcoming year?
To my mind, it is unlikely that the BOJ will achieve a 1 per cent inflation level in the near future. I do not think anything has materially changed in terms of economic performance of the Japanese economy. There is no much of inflationary pressure with regards to commodity prices globally. Thus, I do not see the upside risk in terms of inflation outlook in the Japanese economy. In addition, the key factor here is that I do not think the Japanese economy is going to put up a very strong performance, which in theory implies the inflation risk. That is not our baseline scenario.

What are your forecasts for USD/JPY and EUR/USD pairs for the end of this year?
In the next month we are probably looking at the lower EUR/JPY  and we expect that the USD/JPY pair will be slightly higher, around an 80.00 level, but certainly not much higher than that.  That will happen mostly due to the fact that the Dollar will gain strength.

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