USD/JPY – Bank of Japan will do whatever it takes to fight deflation

on Aug 21, 2013

**, Wednesday 21 August:**

During a speech yesterday, the Bank of Japan’s governor Haruhiko Kuroda emphasized that the central bank will do whatever it takes to fight deflation. A year after Mario Draghi’s famous ‘’whatever it takes’’ speech in London there has been return to something approaching normality in the European financial markets and reduced tail risks in the Euro area.

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Kuroda also assured the markets that the economy can still expand at 2 percent growth in the next 3 years, despite the planned sales tax increase. The BoJ governor does not expect the sales tax to slow Japan’s economic recovery and encouraged the government to proceed with its policies aimed at reducing a national debt that reached a quadrillion yen at the end of July. Kuroda warned that postponing austerity measures could be a major problem in the future.

The Nikkei 225 increased marginally by 0.21 percent to 13,424.44 in Tokyo trading. Today the USD/JPY has been trying to break out of the downward trend line projected from 5 July that has proved to be a strong resistance for the bulls. As these words are written the currency pair is holding around 97.65 or 0.38 percent up intraday.
US Mortgage Applications for last week decreased by 4.6 percent following the prior decline of 4.7 percent.

Existing Homes Sales for July are scheduled at 15.00 BST, with expectations of $5.15 million a slight increase from the previous $5.08 million.
The highlight today is the FOMC minutes from the meeting in July due out at 19.00 BST. The market will scrutinize every nuance from the report for any clues on the timing of tapering and just how strong the level of conviction is to begin reducing asset purchases in September. Any discussion for alternation on the forward guidance will shed further light on the post-QE FOMC policy stance.


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