The Bank of Japan announced a 2% inflation target, open ended buys from January 2014 and additional steps. Most moves were expected. USD/JPY sells the fact:
The BOJ committed to fighting deflation, something that isn’t new. The 2% inflation target is new, but was widely expected. Also open ended action (Fed-style) was discussed, but perhaps the markets wanted to see an immediate open ended bond buying move before selling more of Japan’s currency.
The BOJ certainly caved to pressure coming from the new government led by Shinzo Abe. The LDP won a landslide victory and vowed to stimulate the economy. Elections for the upper house are held in July. The current coalition has a two thirds majority allowing it to bypass the upper house, but the LDP wants more power.
Dollar/yen traded around the critical 90 line and fell immediately after the announcement to 88.85, stabilizing above the 89.10 line afterwards.
Further support is at 88.40. A break above 90 seems somewhat unlikely now. For more lines, see the USDJPY forecast.
