THE TAKEAWAY: BOJ increased their Asset Purchase Program by 10 trillion Yen > BOJ will continue to provide strong monetary support to support growth and smooth financial system > Yen trades lower.
The Japanese Yen traded lower versus its major counterparts as the Bank of Japan announced an additional 10 trillion yen of asset purchases in an attempt to provide support to the economy by conducting monetary policy in an “appropriate manner”, according to the released policy statement. The bank also decided to keep their key borrowing rate unchanged at 0.10 percent.
The Central Bank also noted the additional purchases are scheduled to be completed by 2013 and should consist of 5 trillion yen of treasury discount bills and 5 trillion yen of Japanese government bonds.
While Japans economy grew at a modest pace in the first half 2012, the rate of growth has recently slowed as overseas economies moved “deeper into a deceleration phase,” according to the BOJ. On Balance it appears that the bank will continue to provide easing measures as necessary to keep the Japanese financial system operating within a stable keel and bolster domestic growth throughout the economy.
Traders seemed to bid up the Australian dollar versus the Yen for additional purchases of assets by the central bank should result in an increase in the supply of yen which could debase its value. Moreover, the Australian Dollar is a higher yielding currency and traders can thus earn a greater rate on their investments when paired with the lower costs of funding in Yen.
AUD/JPY, 5 Minute Chart