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Bank Of Japan Keeps The Interest Rate Same, Sets Inflation Target

January 22, 2013 5:50 am GMT+0  in Forex Fundamentals and News

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Japanese YenBank of Japan kept the interest rate same at 0.1% as per today’s official monetary policy statement released by the Policy Board of the Bank of Japan but set an inflation target of 2% to maintain price stability and to fight the ongoing deflation.

“The newly-introduced “price stability target” is the inflation rate that the Bank judges to be consistent with price stability on a sustainable basis. The Bank recognizes that the inflation rate consistent with price stability on a sustainable basis will rise as efforts by a wide range of entities toward strengthening competitiveness and growth potential of Japan’s economy make progress. Based on this recognition, the Bank sets the “price stability target” at 2 percent in terms of the year-on-year rate of change in the consumer price index (CPI) — a main price index. Previously, the “price stability goal in the medium to long term” was in a positive range of 2 percent or lower in terms of the year-on-year rate of change in the CPI and the Bank set a goal at 1 percent for the time being. This time, replacing a “goal” with a “target” and setting that target at 2 percent in terms of the year-on-year rate of change.”, the policy statement released by BoJ mentioned.

Japan inflation rates since 2005

Japan historical inflation rates

Japan inflation rates since 2011

Japan inflation rate change since 2011

USD/JPY volatilityIn order to pursue aggressive and targetedEUR/JPY volatility monetary easing, BoJ introduced open-ended asset purchasing method. ” The Bank will pursue aggressive monetary easing, aiming to achieve the above-mentioned price stability target, through a virtually zero interest rate policy and purchases of financial assets, as long as the Bank judges it appropriate to continue with each policy measure respectively. With respect to the Asset Purchase Program, after completing the current purchasing method, from January 2014, the Bank will introduce a method of purchasing a certain amount of financial assets every month without setting any termination date.”, today’s policy statement mentioned.

USD/JPY witnessed an increased volatility with the policy board announcement. The pair went as high as 90.15 and then dropped to 88.89. EUR/JPY also saw suddeny volatility without a clear direction when the pair went as high as 120.16 and then dropped equally strongly to 118.65.

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Himanshu, by qualification a mechanical engineer with diversified experience of working in Europe and Asia Pacific, has been trading in Forex market for close to a decade. Himanshu also runs one of the fastest growing Forex portal ForexAbode.com which provides free Forex trading analysis, forecast & strategies, free trading tools, education, Forex Blogs and Forex Forum and contributes the analysis to financial and Forex websites like SeekingAlpha.com, MarketOracle.co.uk, ForexStreet.net, CountingPips.com, International Business Times and some more. Contact details: You may please leave your suggestions, comments or complaints using the comment form or write to us using the Contact Us page. You may also connect the author on Google at +Himanshu Jain

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