A board member of the Bank of Japan, Sayuri Shirai mentioned that it would take longer than the originally expected two years for the bank to achieve its targets. As a recap, the Bank of Japan has been increasing its asset purchases to pump in money into the system. This in turn would increase the money supply in hope that inflation rates would go up as more money in the system would weaken the value of the Yen. Japan needs to achieve an inflation rate of 2% for the economy to head into full recovery.
The impact of her speech points to inflation needing a longer time to hit the 2% mark. Based on purchasing power parity, the Yen is set to strengthen temporarily against other currencies, all else being equal. In theory, the exchange rate would be influenced by the purchasing power, where the currency with the lower inflation rate would appreciate against the currency with a higher inflation rate. A more concise explanation of purchasing power parity can be found here.
I shorted USD/JPY at 101.701 and 101.569 and closed both my positions at 101.470
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