FXStreet (Delhi) – Derek Halpenny, European Head of GMR at MUFG, suggests that despite the surprise announcement by the BoJ today, the impact on the yen has been far smaller than immediately after QQE and QQEII were implemented. Key Quotes “USD/JPY jumped by 4.0% on the day QQEI was announced while USD/JPY jumped 3.0% after QQEII was announced while today USD/JPY is a bit more than 2% higher. USD/JPY did carry on rising in the days after QQEI and QQEII but we are not as convinced that will be the case this time around. This policy decision does show the determination of the BOJ to remain on the front foot in its fight to end deflation in Japan, but global conditions are perhaps currently a little more difficult to expect further substantial USD/JPY gains. But there had been certainly a risk of USD/JPY falling, perhaps below 115.00 on the back of no action today and clearly that now has been forestalled. The final key point on the Law of Diminishing Returns is of course valuation. By our PPP metric, USD/JPY is currently about 25% over-valued and has never been at this scale of over-valuation since the 1970’s. That makes further substantial yen depreciation from here far more difficult, especially also given Japan’s rapidly expanding current account surplus.” For more information, read our latest forex news.