"There is a long way to go" before hitting the 2% inflation target but the y/y change in Japan's core CPI has been in positive territory in the past few months, in a range of 0.5% to 1%. We expect that the inflation target of 2% could be reached sometime in late fiscal 2014 or early fiscal 2015 "
- Haruhiko Kuroda, Bank of Japan Governor
Surprise, surprise. The Bank of Japan to maintain its unprecedented stimulus programme and ready to add more liquidity into financial markets in case risks to the economy threaten its 2% inflation target. On Monday in a speech at a financial seminar Haruhiko Kuroda pointed out the economy is on track toward central bank's 2% inflation aim, as current accommodative stance is considered as an appropriate. Kuroda also said the target would be reached in sometime late next fiscal year or even early fiscal 2015, which ends in march 2016. As always, soon after his comments the Yen fell, with USD/JPY hitting 101.92.
What was new, indeed, is the fact Kuroda shrugged off negative interest rates as an option for the central bank, as they have become reliant on unconventional steps to stimulate the struggling economy. Though he does not exclude such an option in other countries, Kuroda mentioned this tool could have been used in the past, and only as a short-term solution.
The Yen could be highly volatile this week, as on Thursday the Statistics Bureau will unveil October's inflation data, with core CPI expecting to accelerate up to 0.4%, suggesting Abenomics is working, albeit slowly.
© Dukascopy Bank SA