USD/JPY price trades sideways as PM candidate Suga prefers to keep ultra-loose monetary policy

USD/JPY price trades sideways as PM candidate Suga prefers to keep ultra-loose monetary policy
Written by:
Michael Harris
6th September, 10:46
  • Suga, a frontrunner to be the next PM, says he would prefer to keep Abe’s ultra-loose monetary policy
  • “I highly approve of his handling of monetary policy,” Suga said in relation to BoJ’s Governor Haruhiko Kuroda
  • USD/JPY closed almost 1% higher this week as the price action continues to trade sideways

USD/JPY price closed the week nearly 1% higher as the price action continues to trade in the sideways manner. Yoshihide Suga, the incumbent Chief Cabinet Secretary of Japan and a clear frontrunner in a race to become the next PM, reiterated that he would prefer to keep Abe’s ultra-loose monetary policy.

Fundamental analysis: Suga to replace Abe?

Yoshihide Suga stated he would prefer the central bank to keep using its ultra-easy monetary policy since the country is still recovering from the COVID-19. Suga is also the current frontrunner to be the next Prime Minister of Japan.

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He also said he would think about launching one more stimulus plan by the end of 2020 to “put the pandemic to an end and shift the economy to a new stage.”

“I highly approve of his handling of monetary policy,” Suga said, referring to Bank of Japan’s Governor Haruhiko Kuroda, who is taking easing measures that were part of Prime Minister Shinzo Abe’s “Abenomics” stimulus strategy.

“I want to carry over (the bold easing steps),” Suga added.

Suga’s comments probably mean that he will attempt to keep up Abe’s growth-enhancing economic policies as coronavirus hurt Japan’s economy, which was in recession even before the pandemic. 

His plans are focused on helping smaller firms recover by raising competitiveness and promoting consolidation. To this end, a new government would be created to foster digitalisation of government services and other industries like healthcare delays in those sectors have delayed payouts to coronavirus-hit companies and households.  

“I know there could be resistance, but we should move forward on this,” Suga commented, referring to his plan to enable clinics to permanently offer online medical treatment services. 

Online medical treatment is available in the country only temporarily to serve patients that can’t go to hospitals due to coronavirus. 

Suga is a leading candidate for the forthcoming Liberal Democratic Party’s (LDP) leadership election scheduled for Sept. 14, following Abe’s decision to resign due to health issues. Since LDB owns the parliamentary majority,  the winner of these elections will likely become the next Prime Minister. 

Technical analysis: More sideways action

USD/JPY price has continued to trade sideways despite a correction in the stock market that occurred this week. The Japanese Yen lost some ground to the U.S. dollar as the USD/JPY bulls forced a close above the $106 mark. 

USD/JPY price daily chart (TradingView)

The buyers will now try to push the price action towards a strong resistance area around $107, as the 100-DMA sits at $106.90, in addition to the descending trend line that connects the lower highs.

Summary

Yoshihide Suga, the frontrunner to become the next Prime Minister of Japan, said he would like the Bank of Japan to continue employing its ultra-easy monetary policy as the country still didn’t fully recover from the coronavirus pandemic.

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