JPY held its first gain and remain steady higher for the past eight trading days against USD on speculation that CPI data tomorrow will show Japan inflation quickened the most in more than two decades. In addition, the increasing uncertainty in Ukraine also support for the gain of JPY.
The sell-off in USDJPY during the European trading session mainly came from the news of increasing tension in Ukraine. Risk aversion in the forex market has been triggered by the Russia’s warning of a potential military response to the current events in Eastern Ukraine. JPY normally strengthen during the time of political uncertainty.
BoJ Governor Kuroda expects inflation will exceed their projections to stay on track to their 2% CPI target. Deputy Governor Nakaso also believes the economy is resilient enough to absorb the effect of the consumption tax increase. However, BoJ could adjust monetary policy if the outlook for the economy or inflation changes.