The Euro to Japanese Yen (EUR/JPY) exchange rate was trading at its lowest level in two years on Tuesday due to signs that the Japanese economy is improving.
The Euro to Japanese Yen (EUR/JPY) Exchange Rate Was Trading At a Session Low of 126.0500
The Japanese Yen advanced against several major peers including the Pound Sterling (GBP) after the Bank of Japan (BOJ) announced on Monday that it had upgraded its assessment of the nation’s economy. Bank policy makers said that the Japanese economy is recovering moderately as the impact of the consumption tax introduced last April fades. The prospect of the BOJ introducing more monetary stimulus measures was also reduced.
The bank singled out three regions in particular that have performed well. The Hokuriku, Tokai and Kinki regional economies had all seen improvements in employment and production levels.
‘Amid a pickup in production backed by a moderate increase and external demand, the employment and income conditions are continuing to improve steadily,’ said a BOJ official.
The minutes of the Bank of Japan’s last policy meeting were also continuing to support the Japanese Yen as they showed that Bank of Japan Governor Haruhiko Koruda remained confident that the nation’s economy is recovering. Koruda also stressed that the current stimulus programme will remain in place for as long as it takes until inflation reaches his target of 2%.
No further expansion of the already massive stimulus programme is likely for the time being.
The BOJ has stood pat since expanding its massive stimulus in October last year to prevent slumping oil prices, and a subsequent slowdown in inflation, from delaying a sustained end to deflation.
The Euro remained weak against the Japanese Yen despite the release of economic data, which showed that Eurozone industrial production smashed economist forecasts.
The data published by Eurostat, showed that production across the currency bloc increased by 1.6% in February, up from the revised figure of 0.4% in the preceding month. On a month-on-month basis, industrial production rose by 1.1%, a sharp rise from the revised decline of -0.3%.
Ireland, Lithuania, Croatia and Greece recorded the biggest output increases, rising 16.3% 6.1%, 3.5% and 2.5% respectively.
The strong report is just the latest to suggest that the Eurozone economy is finally starting to improve.
The Euro could regain some ground against the Japanese Yen on Wednesday if the latest Japanese industrial production data comes in poorly. Economists are forecasting that production fall by -3.4% in February.