BOJ, government officials reportedly plan to meet
Government also said to be gearing up to consider more stimulus steps
By Lisa Twaronite, MarketWatch
Last Update: 5:23 AM ET Aug 17, 2010
TOKYO (MarketWatch) -- The Japanese yen came off its highs against the U.S. dollar and Tokyo stocks closed off their lows Tuesday, after local media reported that Japanese Prime Minister Naoto Kan and Bank of Japan Gov. Masaaki Shirakawa will meet Monday, and separately reported that the government will begin discussing further stimulus steps.
Still, the Nikkei Stock Average lost 0.4% Tuesday to end at 9161.68, its lowest close since November 2009.
Kan and Shirakawa have already agreed to meet quarterly, and their last such meeting took place on June 21. But in the meantime, government data released Monday suggested the country's economy is far more fragile than many had believed, and is likely on track to be overtaken by China. See full story on Japan GDP.
Adding to the economic woes, the Japanese currency has been surging, hitting a 15-year high against the dollar last week.
On Tuesday, the dollar C_JPY slipped to 85.25 yen from ¥85.33 in late North American trading Monday, though it was off its Tuesday low of ¥85.13, according to FactSet data. See Tuesday's Currencies report.
While a dollar level of ¥85.00 is "tolerable for most Japanese corporations who have been able to hedge their positions, the fear among Japanese authorities is that a decisive break below 85.00 would quickly precipitate a move towards 80.00 which could prove devastating to Japanese corporate profits," Boris Schlossberg, director of currency research at GFT, said in a note to clients Tuesday.
Although direct currency market intervention remains "unlikely," he said, one possible policy move that Kan and Shirakawa might consider is expanding the BOJ's current ¥20 trillion ($233 billion) quantitative-easing program to a six-month program from the current three-month time frame.
"Yet despite the latest efforts by Japanese officials to stem the rise of the currency, yen's fate will depend much more on the developments on this side of the Pacific rather than any policy moves out of Tokyo," he said, adding that the dollar's primary driver against the yen continues to be the interest rate differential between U.S. Treasury yields and those of Japanese government bonds.
Japan's Minister of Economy and Fiscal Policy Satoshi Arai said Tuesday that the yen's appreciation against the dollar may have entered its final phase, the Nikkei business daily reported.
"I think we may have passed the point where we can address the issue with 'verbal' intervention. But some say the yen's rise is now in its last phase," Arai was quoted as saying in a speech at a Tokyo hotel.
Arai reportedly said the current yen situation "resembles" a phase in which speculative trading tends to become active shortly before foreign exchange volatility stabilizes.
"From around Friday, we'll begin discussions on whether to implement" additional stimulus, Arai also said in the speech, according to Nikkei.
As for the need to compile a supplementary fiscal 2010 budget to finance the extra measures, "Prime Minister Naoto Kan will start hearing from ministries and agencies involved from Friday," Arai said.
Government also said to be gearing up to consider more stimulus steps
By Lisa Twaronite, MarketWatch
Last Update: 5:23 AM ET Aug 17, 2010
TOKYO (MarketWatch) -- The Japanese yen came off its highs against the U.S. dollar and Tokyo stocks closed off their lows Tuesday, after local media reported that Japanese Prime Minister Naoto Kan and Bank of Japan Gov. Masaaki Shirakawa will meet Monday, and separately reported that the government will begin discussing further stimulus steps.
Still, the Nikkei Stock Average lost 0.4% Tuesday to end at 9161.68, its lowest close since November 2009.
Kan and Shirakawa have already agreed to meet quarterly, and their last such meeting took place on June 21. But in the meantime, government data released Monday suggested the country's economy is far more fragile than many had believed, and is likely on track to be overtaken by China. See full story on Japan GDP.
Adding to the economic woes, the Japanese currency has been surging, hitting a 15-year high against the dollar last week.
On Tuesday, the dollar C_JPY slipped to 85.25 yen from ¥85.33 in late North American trading Monday, though it was off its Tuesday low of ¥85.13, according to FactSet data. See Tuesday's Currencies report.
While a dollar level of ¥85.00 is "tolerable for most Japanese corporations who have been able to hedge their positions, the fear among Japanese authorities is that a decisive break below 85.00 would quickly precipitate a move towards 80.00 which could prove devastating to Japanese corporate profits," Boris Schlossberg, director of currency research at GFT, said in a note to clients Tuesday.
Although direct currency market intervention remains "unlikely," he said, one possible policy move that Kan and Shirakawa might consider is expanding the BOJ's current ¥20 trillion ($233 billion) quantitative-easing program to a six-month program from the current three-month time frame.
"Yet despite the latest efforts by Japanese officials to stem the rise of the currency, yen's fate will depend much more on the developments on this side of the Pacific rather than any policy moves out of Tokyo," he said, adding that the dollar's primary driver against the yen continues to be the interest rate differential between U.S. Treasury yields and those of Japanese government bonds.
Japan's Minister of Economy and Fiscal Policy Satoshi Arai said Tuesday that the yen's appreciation against the dollar may have entered its final phase, the Nikkei business daily reported.
"I think we may have passed the point where we can address the issue with 'verbal' intervention. But some say the yen's rise is now in its last phase," Arai was quoted as saying in a speech at a Tokyo hotel.
Arai reportedly said the current yen situation "resembles" a phase in which speculative trading tends to become active shortly before foreign exchange volatility stabilizes.
"From around Friday, we'll begin discussions on whether to implement" additional stimulus, Arai also said in the speech, according to Nikkei.
As for the need to compile a supplementary fiscal 2010 budget to finance the extra measures, "Prime Minister Naoto Kan will start hearing from ministries and agencies involved from Friday," Arai said.