The number one reason for the Yen's weakness appears to be the Bank of Japan's (BoJ) policy. The BoJ feels that it is the Japanese interest to keep a very weak Yen. The logic behind this stance is that the Japanese economy relies greatly on its export, and thus the weaker the Yen, the more exporters will allegedly profit. The main tool the BoJ uses in attempt to reach this target is the low interest rate. Japan currently holds the lowest interest rate in the in the industrial world, merely 0.10%.
However, the BoJ's policy may have missed its target. Last week, the Japanese Trade Balance was published. The report showed that the difference in value between imported and exported goods during September have accumulated to 0.06T, failing to reach expectations for 0.38T, and much lower than the 0.17T result from August. Currently it seems that until the Japanese export will recover and a show similar figure to the ones prior recession, the Yen is likely to continue to drop, especially against the Dollar and the Yen.
As for this week, many interesting news events are expected from the Japanese economy. Yet the most fascinating publication seems to be the Overnight Call Rate, which is scheduled for Friday. The Overnight Call Rate is in fact the Japanese Interest Rate announcement. Analysts expect that the BoJ will retain the 0.10% rate. However, if the BoJ will surprise and decide to hike rates, turmoil is expected in the market.
