29-Apr (FT) — The yen is on track for its biggest weekly gain since the depths of the 2008 financial crisis after the Bank of Japan’s reluctance to fire another easing “bazooka” emboldened traders and raised doubts over the central bank’s ability to reverse the currency’s searing rally this year.
A 4 per cent surge in the currency drove the yen to Y106.92 per dollar, its loftiest level since October 2014, when Haruhiko Kuroda, the governor of the BoJ, shocked financial markets by aggressively expanding a quantitative easing programme designed to lift inflation and quicken economic growth.
Foreign-exchange markets had begun the week primed for further action from a Japanese central bank still grappling with deflation. Analysts at UBS forecast “big easing”, so the decision of Mr Kuroda and his colleagues not to do anything amplified the reaction in the yen.
The lack of action from a central bank which, since the election of Shinzo Abe as Japanese prime minister in late 2012 has built a reputation for bold moves, triggered a 3 per cent leap in the yen on Thursday — its seventh-biggest one-day gain of the past decade.
PG View: Hard to believe Kuroda couldn’t foresee the upside extension in the yen as a likely result of the BoJ’s decision to hold steady.