Trade Desk Thoughts - Japan Overnight Call Rate

Japan Overnight Call Rate Actual 0.50%, Expected 0.50%, Previous 0.50%

Release Explanation: This is the interbank overnight lending rate. It sets the tone for mortgages, commercial loans, and all economic lending criteria. An increase in Interest Rate will have the effect of slowing economic growth. A decrease in Interest Rate is used by a Central Bank to stimulate economic growth. Economic strength can create Inflation, raising Interest Rates is one of the easiest ways to contain Inflation. The Governments Finance Ministry dominate the Bank, whatever they want they get.

Trade Desk Thoughts: The Bank of Japan has kept the Overnight Call Rate unchanged at 0.50%. It is the 23rd straight month the bank has kept rates on hold. In the bank’s words, the economy has now become 'sluggish' in the face of high commodity prices. In the past, the bank had announced its intention to raise interest rates, although this will happen only when the economy is able to support such a move. For the moment, the bank will focus on the downside risk, since the economy is facing recession fears.

Forex Technical Reaction: The yen had a strong response to the news release. The yen had gained 170 pips since the Asian session had begun, from which 80 pips around the release time.

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