USDJPY finally broke through the 80.00 level today in Asian session trade on the back of speculation that the Bank of Japan will expand its monetary stimulus program next week. The NIkkei newspaper reported that the BOJ may consider expanding its asset purchase program by 10 trillion yen to 90 trillion yen at its next meeting at the end of this month.

The news sparked a rally in USDJPY which has been comatose for the past 48 hours, pushing the pair through the key 80.00 level as its nascent uptrend continued. We have long argued that the only sustainable way for Japanese officials to weaken the yen would be to offset the massive QE program of the Fed with one of their own.

Up to now Japanese authorities have been reluctant to use the full force of monetary policy to impact exchange rates, but the latest economic data which has shown massive deterioration in the export sector, must have convinced them that some action was necessary. While 10 trillion yen which is approximately 125 Billion dollars, is considerably smaller than the size of Fed’s program, it is nevertheless a meaningful commitment and will likely provide further impetus for USDJPY rally.

For the time being the pair faces resistance at the 80.50 level but if the US data today which includes jobless claims, pending homes and Durable goods beats expectations, the rally in USDJPY will likely continue.