Forex Trading: JPY Pairs Creating Binary Options Opportunities
Since 2013, The Bank of Japan has adopted a policy of quantitative easing with the negative interest rate, to stimulate fiscal activities along with fueling inflation to 2 percent target level. Being an export oriented economy, overseas economies have a significant impact on the Japanese economy. This makes the JPY an excellent for binary options trading in forex pairs like the USD/JPY and the EUR/JPY.
The recent development of BREXIT and uncertainty around emerging economies have prompted BOJ to continue with its “QQE with negative interest rate” policy and kept the interest rate to record low level of -0.1 percent. At Monetary Policy Meeting (known as MPM), BOJ had decided to stimulate the economy by increasing their ETF outstanding to 6 trillion yen (almost double from previously pegged value), and by increasing dollar-denominated lending to Japanese business houses.
Japanese Inflation Targets
The members’ agreed to the decision of highly adaptive fiscal stance and believed that it will continue to stimulate the economic growth, and will add to their efforts to achieve 2 percent inflation target.
The recent data on inflation indicates the ineffectiveness of the fiscal easing. The inflation is still in negative territory at -0.4 percent in June 2016, same as the previous month and in line with market expectations. Japan’s price stability data indicate a deflationary environment, and it is well below the BOJ’s target of 2 percent inflation.
At the same time, consumer confidence has dropped to 41.3 in July 2016, from 41.8 in June 2016, and below the consensus expectation of 42.2. This will continue to put pressure on inflation. This will continue to fuel the expansionary fiscal policy of the central bank, and provides no room for an upward rate adjustment to the central bank of Japan.
Japanese GDP Growth
Also, the GDP of Japan has lowered to 0 (“zero”) for the Apr-June quarter of 2016, decreasing from 0.5 percent in the previous quarter and lower than the expectation of 0.2 percent. The sharp decline in private and government spending, along with a decline in institutional expenditure and exports has been the main culprit of 0 (“zero”) GDP.
This GDP figure is worrisome for the central bank, and will not allow adjusting rate, rather it will put pressure on BOJ to continue or increase the stimulus considerably. Inflation, consumer confidence and GDP data of Japan, will put considerable pressure on BOJ in short to medium term to continue with their expansionary fiscal stance.