Comments from Japanese and Australian leaders over the weekend are deemed to sustain the bullish trend of the AUDJPY to begin the new trading week. Japanese Prime Minister Shinzo Abe continued to call on the Bank of Japan to double its inflation target after unveiling fiscal stimulus measures last week. Meanwhile, Australian Treasurer Wayne Swan expressed optimism over the global economy amid China’s economic recovery.
Speaking on public broadcaster NHK yesterday, Japan’s Prime Minister Shinzo Abe reiterated his call on the BOJ to set a 2 percent inflation target and make it a medium-term, not long-term goal. He said the move was needed to show the markets it was determined to pursue bold monetary easing to end nearly two decades of deflation. The government is negotiation with the BOJ to issue a joint statement this month to make the central bank accountable for achieving 2 percent inflation. Abe stressed that the statement must explicitly state a 2 percent inflation target. Under intense pressure, sources have revealed that the BOJ will consider easing policy at its rate meeting next week and respond to Abe’s tough stance on deflation.
Japan’s contracted at an annualized 3.5 percent pace in the third quarter after also shrinking in the June quarter, meeting the textbook definition of a recession. Economists say that the economy suffered another contraction in the fourth quarter. Consumer price excluding fresh food, have yet to advance 2 percent for any year since 1997. They fell 0.1 percent in November compared with a year earlier. Likewise, in a sign of his determination to uphold his economic policy, Shinzo Abe said he seeks a “bold policy leader” as the next BOJ governor after current head Masaaki Shirakawa’s term ends in April. “We want someone who can push through bold monetary policy,” Abe said. On increased expectations of BOJ action, the Yen is likely to dip today.
Meanwhile, Australian Treasurer Wayne Swan said the recent pick-up in China’s economic recovery is a positive sign that global demand will improve this year. China’s exports rose more than forecast in December while a broad measure of credit jumped by 28 percent, suggesting that the world’s second largest economy is gaining traction. For its part, prospects for the Australian economy has gained traction in recent months as the price of iron ore, the nation’s most valuable export, inclined to a 15-month high, reflecting expectations of faster growth in China. With the Australian economy expected to receive a boost, the Aussie is apt to strengthen further today, warranting a long position for the AUD/JPY.
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