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Volatility in the Japanese Yen before the BoJ’s Meeting

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Jul. 28 2016, Updated 9:11 a.m. ET

Important week for the Japanese yen

The BoJ (Bank of Japan) will hold its first meeting since Shinzo Abe’s recent election victory. The monetary policy statement is expected on July 29. The initial comments by the prime minister after the win pointed to extra stimulus measures by the BoJ. For more details on the election win and subsequent statements, read Theresa May and Shinzo Abe in Focus as FTSE 100 and Nikkei 225 Soar. Recent speculations in the market suggest that the stimulus measures would be less than the market’s initial forecast. As a result, the yen posted gains on July 27. In this part, we’ll look at the recent volatility in the Japanese yen. Read Japanese Yen: The Safe-Haven Currency for Decades and Why the High Volatility of the Japanese Yen in Recent Months? to learn more about the yen.

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Recent volatility subsides

The Japanese yen gained strength during mid-July due to growing uncertainties surrounding the BOE’s (Bank of England) monetary policy. The BOE and the European Central Bank adopted a “no change” stance on the monetary policy. This left the BoJ to be the first major central bank with the possibility of more expansion in near term. The currency started depreciating and volatility in terms of options prices started increasing.

Impact on the market

The iShares MSCI Japan ETF (EWJ) was trading 0.17% higher at the close of trade on July 27, 2016. The gains in the WisdomTree Japan Hedged Equity ETF (DXJ) were more compounded. It rose by 1.3%.

Japanese ADRs (American depositary receipts) on US exchanges were trading on a positive note. Leisure goods maker Sony (SNE) rose by 0.60% on July 27, 2016. In the banking arena, Mitsubishi UFJ Financial (MTU) rose by 0.21%, while Sumitomo Mitsui Financial Group (SMFG) fell by 0.83%.

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