Research Team at BBH, suggests that the BOJ Governor Kuroda's speech to parliament today was important. Key Quotes “He confirmed a shift that seemed to have been signaled by the recent surprise rate cut decision. In effect, Kuroda acknowledged that increasing the monetary base was not sufficient to boost inflation expectations and inflation, which was the center-piece of the QQE. Instead, Kuroda indicated that lower interest rate will be pursued to close the output gap, which in turn will lift inflation and inflation expectations. If it is a question of emphasis, Kuroda seemed to be embracing more of the Keynesian approach than the monetarist approach. The problem, however, is that trend growth in Japan is too low. The BOJ estimates it to be around 0.5%. Despite the economy having contracted for two of the past three quarters, full employment appears to have been achieved (though without upward pressure on wages). Kuroda's comments also lend support to ideas that with the negative interest rate threshold finally crossed, it may be used more frequently than the adjustments to the monetary base. Kuroda appears to be giving as much of a signal as possible to expect additional rate cuts. A move as early as next month cannot be ruled out. The dollar has been pushed through the JPY112.00 level after trading near JPY113.40 yesterday. We have been concerned that from a technical perspective, there was scope for the greenback return to (and possibly through) the low just below JPY111.00 on February 11. We have identified the JPY110.50 area as a near-term objective and recognize the significance of JPY110.” For more information, read our latest forex news.