Forex Flash: BoJ’s hands tied? – UBS

The recent G7 meeting endorsed Japan's approach to kick-starting domestic economic growth. Bank of England Governor King on Wednesday made this clear: "What that statement means is that, when countries take measures to use monetary stimulus to support growth in their economy, then there will be exchange rate consequences and they should be allowed to flow through."

However, Japan does not enjoy complete freedom on the policy front. According to Research Analyst Gareth Berry at UBS, “The group’s reference to "domestic instruments" is likely aimed at discouraging foreign bond purchases funded by freshly-minted yen. Does that mean the three-month old USDJPY rally is doomed? – we doubt it.”