The yen weakened against the dollar following the Bank of Japan’s (BOJ) decision to hold steady on its monetary policy. The BOJ’s commitment to its current course reinforces expectations of continued easing, diverging from the Federal Reserve’s anticipated tightening measures. This policy divergence is a key factor influencing the yen’s depreciation.
Market Reaction
The dollar gained ground against the yen as investors reacted to the BOJ’s announcement. The decision to maintain the current policy stance signals a continued commitment to stimulating the Japanese economy through monetary easing.
BOJ Policy
The Bank of Japan has been implementing aggressive monetary easing policies in an effort to combat deflation and stimulate economic growth. These policies include:
- Negative interest rates
- Quantitative easing
- Yield curve control
Federal Reserve Policy
In contrast to the BOJ, the Federal Reserve is expected to begin tightening its monetary policy in the near future. This includes:
- Raising interest rates
- Reducing its balance sheet
Impact on the Yen
The divergence in monetary policy between the BOJ and the Federal Reserve is expected to continue to put downward pressure on the yen. Investors are likely to favor the dollar as the Federal Reserve raises interest rates, making dollar-denominated assets more attractive.
