Reply #43: Coalition & BOJ's Yen weakening policy may be more effective than expected? [View All]

[Ghost Dog]

BOJ Action Reduced Yen Volatility, Signals Exit, Calyon Says

Dec. 4 (Bloomberg) -- The Bank of Japan has reduced the yen’s volatility with its new 10 trillion yen
($113 billion) program aimed at stabilizing interest rates, signaling the start of its plan to normalize monetary policy, Calyon Securities said.

The central bank’s decision to offer three-month loans to commercial banks at a rate of 0.1 percent brought down yen borrowing costs, which should limit gains in the currency in the long run, Susumu Kato, Calyon’s chief economist in Tokyo, said in an interview with Bloomberg News yesterday. The BOJ announced its measures after an emergency meeting Dec. 1.

“It’s important to know it’s the start of exit policies,” Kato said. “The Bank of Japan tried to prevent a pickup in interest rates because that could make the Japanese yen stronger.”

The yen was little changed at 88.20 per dollar today after declining for the past three days. The currency climbed to 84.83 on Nov. 27, the strongest since July 1995. It may decline to 90 versus the dollar by the end of March 2010, Kato said.

“Before stabilizing at 90, there will be some risk of further strengthening of the Japanese yen,” he said. “Maybe close to 80, but that will be the end of the story. After that, it will stabilize.”

/... http://www.bloomberg.com/apps/news?pid=20601080&sid=a4PMrmelPa9k

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Hatoyama Delays Stimulus Package Amid Coalition Rift

Dec. 4 (Bloomberg) -- Japan’s Prime Minister Yukio Hatoyama failed to persuade one of his coalition partners to accept his stimulus package, delaying its release until next week.

Hatoyama’s plan to announce spending of as much as 4 trillion yen ($45.4 billion) today was blocked by Financial Services Minister Shizuka Kamei, head of one of the two minority parties that the Democratic Party of Japan needs to smooth the passage of legislation. Chief Cabinet Secretary Hirofumi Hirano said it will probably be agreed upon on Dec. 7.

“We cannot destroy the coalition,” Hatoyama told reporters in Tokyo. “However, there’s an issue of fiscal restraint, making it hard to increase the package.”

...

Kamei has been an outspoken member of Hatoyama’s cabinet. He accused the Bank of Japan of sleeping on the job, and blamed the country’s biggest business lobby for rising murder and suicide rates. In an interview this week, he called on Japan to ask the U.S. and Europe to join in coordinated action to weaken the yen, which has risen 5.4 percent in the past three months.

...

Mikio Shimoji, head of policy research for Kamei’s PNP, said Kamei won’t compromise on the size of the package. “Unless it’s around 8 trillion yen, the economy won’t respond,” he said. The DPJ “has no choice but to bow down.”

/... http://www.bloomberg.com/apps/news?pid=20601080&sid=a9QerYPOFHJQ

... also ...

... The iShares MSCI Japan Index Fund, a U.S. exchange-traded fund that tracks the country’s stocks, has risen 6.7 percent this week, heading for its biggest weekly gain since March. The rally began after the ETF fell for two months and approached its 200-day average price in November...

... Japanese equities have lagged this year as the yen rose to a 14-year high against the dollar, threatening exports that the country is counting on for an economic recovery. The Topix index added 3.4 percent this year, making Japan the worst performing among the world’s 40 largest stock markets.

/... http://www.bloomberg.com/apps/news?pid=20601080&sid=aODwDaVFhK6M