After the press about the plan of the Japanese Prime-Minister to launch economic stimulus program for 28 trillion yen on 2 August, the pair USD/JPY soared up to the level of 106.50. Japanese stock index Nikkei Stock Average rose by 1.7% up to 16664.00 points at the end of the Asian session.
This is going to be one of the most extensive measures to stimulate economy of the country over three and a half years since Abe took office as Prime Minister of Japan. Japanese government may also the issue of 50-year bonds.
Uncertainty in the global economy, high rise in the Yen and weak macro-economic statistics, as well as low inflation in the country are the facts, which force Japanese authorities to seek a way out from a difficult situation.
Investors will focus attention on the meeting of the Bank of Japan, which will end on Friday. The Bank of Japan is under pressure from the government and the necessity to ease monetary policy.
Today at 20:00 (GMT+2) interest rate decision by the US Fed will be announced. The rate is likely to remain at the previous level of 0.5%. However, if the Fed indicates possibility of monetary policy at the meeting in September, the USD will go up.
Futures for the Fed funds rate shows 20% probability of the rate hike in September against 12% possibility earlier this month. Probability of the increase in rate in December makes up to 51%.
American positive macro-economic statistics and the decrease in concerns about Brexit, make investors believe that the Fed will raise interest rates this year.
Therefore, fundamental data give grounds to assume that the pair USD/JPY will continue to grow.