The Japanese yen is foreseen to sustain its weakness alongside the US dollar today on continuing speculation that the Bank of Japan will ramp up efforts to revive economic growth under pressure from Prime Minister Shinzo Abe. Meanwhile, demand for the US dollar is seen to be supported by positive jobs and services data from the world’s largest economy.
In an interview yesterday, Japanese Finance Minister Taro Aso stressed the need for larger monetary and fiscal stimulus to revive the ailing Japanese economy. Prime Minister Abe has repeatedly called on the BOJ to share a 2 percent inflation target, double its current price target, to show its determination to combat deflation. Under pressure, analysts highly believe that the central bank will at least debate setting a higher inflation target at its next rate review scheduled on January 21 and 22. Aso said cabinet member will discuss monetary policy with BOJ Governor Masaaki Shirakawa at the Council of Economic and Fiscal Policy, a top government panel that will kick off this week. The panel will then meet at least once a month to map out long-term fiscal and economic policies. As such, expectations for powerful economic measures from the BOJ and Abe’s administration are deemed to weigh on the Yen.
Over to the US, the Unemployment Rate held steady at 7.8 percent in December as the economy added 155,000 new jobs, suggesting that the trend of slow yet steady improvement has continued and that employers were not put off by the protracted fiscal cliff negotiations. The figures are largely in line with analysts’ expectations, with broadly distributed gains in employment across sectors from construction, manufacturing, to healthcare. Construction added 30,000 jobs, the most in 15 months, reflecting additional hiring needed to rebuild after Superstorm Sandy. Manufacturing gained 25,000 jobs, the most in nine months. In further positive news, the vast services sector in the US expanded at its fastest clip in 10 months last month, boosted by a rise in new orders. Considering these, a long position is recommended for the USD/JPY trades today.
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