Yen Extends Gains on Sato's Comments

Market Trends - 02/06/2016

The Japanese yen, after previously easing back on increased expectations of a rate hike in summer from the US Fed is now trimming its losses. The yen started June on a firm footing with USDJPY seen slipping to a 10-day low. After a weak manufacturing reports out of Asia however, sentiment soured. Yesterday's positive economic data in the US did not help the dollar to find a base either. Japan's Prime Minister confirmed the delay of a sales tax hike and also announced a second supplementary budget plan, or fiscal stimulus, but stopped short of spelling out the details.

On Thursday, the Bank of Japan's monetary policy committee member Takehiro Sato said that the central bank should work towards reforming its policy framework to achieve the 2.00% inflation target. He said that negative interest rates would have a tightening effect under the current scenario and suggested that it would work only when the BoJ starts tapering its QE purchases. Sato is considered a critic of BoJ Governor Kuroda's policies. The Bank of Japan will be meeting later in June for its monetary policy talk, just 6 hours after the FOMC. Speculation is rife that the Bank of Japan could pull the stimulus trigger once again in either June or July.

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