There’s no question that the Japanese yen trade is hot right now.
Since September, Japan’s currency has weakened nearly 15 per cent against the dollar in September, and today, it hit its lowest level since June 2010.
Investors are betting that newly-elected Japanese Prime Minister Shinzo Abe can stir some inflation – the likes of which Japan hasn’t really seen in over a decade – and revive the country’s stagnating economy.
Abe has been forceful in his criticism of the Bank of Japan and has suggested numerous policy measures the central bank could adopt to make its monetary easing stance even more accommodative – threatening to rewrite the Bank’s mandate if it does not comply.
Each time Abe makes a suggestion – like targeting the unemployment rate, or committing to open-ended quantitative easing – the yen falls further.
Reuters reported today that the Bank of Japan was weighing a number of options to make monetary policy more accommodative that it may introduce at its next meeting on Tuesday.
In light of the report, it’s worth taking a look at all of the policy options currently available to the Bank of Japan.
Morgan Stanley put together this handy table to do just that:
The BoJ is reportedly only considering a few of these options at the moment. However, the central bank may find itself moving further down the list – many predict that the 2-per cent inflation target being touted by authorities will be difficult to reach.