Light At The End of the Tunnel

The BOJ governor Haruhiko Kuroda struck a more optimistic tone yesterday. During comments made at a conference being held by the BOJ research institute, the BOJ governor said that Japan is now finally “beginning to see the light at the end of this pandemic tunnel”. However, Kuroda was keen to make clear that there is still a great deal of uncertainty and added the caveat that : “the light does not clearly reveal the shape of the society and economy we are approaching”.

Fourth Wave Fading?

Japan has suffered greatly over the course of the pandemic and has been engaged in a tense battle with a fourth outbreak of the virus over recent months which has led to fresh lockdowns and restrictions. The country was also relatively slow in rolling out the vaccine which no doubt added to the fourth wave of the virus. However, with figures finally starting to recede again and the vaccination numbers starting to pick up, there is a hope that the country will be able to get a grip on the pandemic finally.

BOJ Looking At Extending Business Funding Scheme

Looking ahead, Kuroda noted that the main challenges faced by the central bank stem from the need to offer funding support in a bid to tackle solvency and corporate viability. These comments come on the back of Kuroda last week noting that the BOJ would weigh up offering an extension to corporate funding support scheme beyond the current September deadline.

Uneven Recovery

One of the key challenges facing Japan has been the uneven nature of the recovery there. The skew between the rebound in the factory sector and the non-factory sector means that pockets of the economy are accelerating at a far quicker pace than others. Kuroda also touched on the way the pandemic has forced a shift in society including the uptick in digitisation, not least in the currency space.

On a broader level, Kuroda closed by noting that “policymakers face the additional challenges of the economic inequality”, adding that these inequalities have “become even more apparent during this health crisis”. Finally, Kuroda said that the pandemic has flagged the “response to increasing worldwide concerns over climate change”.

Technical Views

USDJPY

UDJPY remains capped by the 109.63 level resistance for now, with price having turned back beneath the rising channel low. The MACD has turned lower here though the indicator remains flat, reflecting the loss of momentum, with the RSI trading around the mid-way mark. For now, while the 107.91 level holds, the focus is on further upside. A break of 107.91 however, will turn focus to the 106.97 mark next.

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