Some Bank of Japan board members warned a resurgence in the coronavirus pandemic could delay economic recovery and destabilize its banking system by pushing more companies under, minutes from the bank’s July rate review showed on Thursday. While they agreed on the need to ramp up stimulus if needed, the BOJ policymakers said the hit to financial institutions’ profits from the pandemic could erode their ability to boost lend, the minutes showed.

A few members were quoted as saying that “Infection numbers are increasing at a faster pace globally, so we need to be on alert of the possibility of a re-insurgence including in Japan.” “If infection numbers rise again, the timing of an economic recovery will be delayed,” one of them said. The damage from the pandemic, if prolonged, could lead to job losses, hurt household income, and cool consumption, another said.

While the BOJ kept policy steady at the July rate review, the remarks underscore a lack of confidence the board members had over their projections of a modest economic recovery.” Members agreed if financial institutions’ profits remain under pressure for a prolonged period, that could undermine financial intermediation,” the minutes showed.

Japan’s factory activity extended declines in September largely due to a sharper fall in output, this adds to the weakness of yen.

On the other hand, The U.S. Dollar is supported by hawkish remarks from a Federal Reserve speaker after Chicago Federal Reserve President Charles Evans mentioned the prospect of raising interest rates. This came as a surprise to investors because the narrative from central bank policymakers since March has been we’re not going to raise rates at any point in the foreseeable future.

“I would like to raise rates as soon as anybody,” Evans said. For me, that’s going to be when the economy is very very strong and real rates are rising,” he said. “Monetary policy in some sense would follow the economy up,” he said.“We could start raising rates before we start averaging 2%, we need to discuss that,” he added.

USD/JPY 4 Hour Chart:

Support: 104.96 (S1), 104.57 (S2), 104.30 (S3).

Resistance: 105.62 (R1), 105.89 (R2), 106.28 (R3).

Investors have turned their attention to dollar as Yen is losing its power due to the worries on recovery from the pandemic. We expect a bullish trend for USD/JPY.