The Bank of Japan (BOJ) announced last week that it plans to review its monetary policy stimulus in September – an announcement that kept expectations for "helicopter money" alive, Helicopter money is a term defined by many banks and analysts as central banks injecting cash directly into the real economy.
Comments made by the BoJ Governor Haruhiko Kuroda on Tuesday had investors confused over the central bank's course of action in September. Speaking to media, Kuroda said that the central bank's planned review will not lead the BoJ weakening its stimulus. He also stressed that the comprehensive assessment of its policy will be conducted in order to achieve the 2 percent inflation target at the earliest possible time.
The central bank in its decision on Friday last week announced a modest rise to its monetary stimulus in the form of an increase in purchases of exchange-traded funds (ETF). The bank also maintained its base money target as well as the pace of purchases for other assets including Japanese government bonds. It also left interest rates unchanged at 0.1 percent. Nonetheless, the announcement of the fiscal package on Tuesday, that has different elements of spending, has investors left disappointed and the currency strengthening.
"What the BoJ did, it did not qualify as a 'bazooka' by markets and the yen strengthened," Nandini Ramakrishnan, global markets strategist at JP Morgan told CNBC via email. "This isn't entirely justified, in that the BOJ did announce certain measures, but the market had its mind set on more."
Ramakrishan told CNBC that she expects the yen to remain at these levels as it has already strengthened in the few days following the BOJ's announcement.
"Using the previous market reactions to BOJ meetings (January, April, and June), this would suggest a range from plus or minus 2 from the current level of 101.7, depending on the upcoming stimulus package," she said.