Home Forex News USD/JPY Turns Bearish On Japan $1.95 Trillion Stimulus Package

USD/JPY Turns Bearish On Japan $1.95 Trillion Stimulus Package

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  • Japan $1.95 Trillion Bond Buying Package
  • Dollar Weakness
  • Coronavirus Vaccine Talk Impact

The Japanese’s Yen strengthened against the U.S Dollar in Wednesday trading session, conversely sending the USD/JPY pair to one-week lows. The drop came at the backdrop of weakness in the U.S dollar, fueled by talks of a possible coronavirus vaccine.

Japan Stimulus Package

Traders continued to bet on Japanese Yen against the greenback after it emerged the Japanese government is closing in on a $1.95 trillion government bond issuance scheme. The massive bond scheme is part of the country’s push to fund spending in a bid to revitalize the struggling economy on the heels of the COVID-19 fallout.

Japan is also processing a second stimulus package that is believed to be worth $1.1 trillion. A good chunk of the stimulus package will go towards cushioning the economy following the coronavirus pandemic.

Bank of Japan has been on a buying spree as it looks to rejuvenate the struggling economy. Its bond holdings rose from 3.4% a year ago to 90%, the size of the country’s economy. The massive money printing is aimed at reflating the economy in a bid to achieve the elusive 2% inflation target.

Dollar Weakness

The USD/JPY also continued to edge lower on a weakening dollar across the board. The U.S dollar did come under selling pressure on reports Novavax is closing in on a vaccine to combat the coronavirus. The news sent demand for safe havens such as the U.S dollar lower.

However, a move lower on the USD/JPY could be short-lived as rising tensions between the U.S and China continue to rattle the markets. President Donald Trump has already warned of a strong response against China push to impose a new security law over Hong Kong.

Soaring tensions between the U.S and China is expected to fuel demand for the U.S dollar as a safe-haven, a development likely to lead to the strengthening of the greenback, which could cause the USD/JPY to bounce back after the recent sell-off.

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