The Bank of Japan: In bed early tonight or out on the town?

February 21, 2007
By Ken Worsley

My chart shows a test of the 119 area at about 5pm JST today, with the dollar gaining back to the 119.52 level right now. It actually looks as if the rate has entered a bit of a channel and will most likely remain there until the BOJ announces its decision tomorrow afternoon.

Wrong. The dollar broke back out to test the 120 mark, shooting briefly to 120.30 (which made me happy, but wrong nonetheless). Now we’ve settled back to the 120.10 area and I’m going to say (correctly this time?) that we will see it sit right around 120 until the Bank of Japan ~~makes~~ announces its decision tomorrow afternoon.

Bloomberg is reporting that “Japan’s Five-Year Notes Rise on View Government to Pressure BOJ” and “Yen Weakens as BOJ Faces Political Pressure to Hold Down Rates.”

And the political pressure?

Finance Minister Koji Omi: “We want the Bank of Japan to support economic growth with its monetary policy. We won’t comment now on details of monetary policy, including interest-rate levels.”

Economic and Fiscal Policy Minister Hiroko Ota : “The central bank will make its decision by examining prices and the state of the economy.”

Prime Minister Shinzo Abe: “The BOJ will take into consideration all factors, including risks”

Yesterday’s Monthly Economic Report from the Cabinet Office: “In order to secure the trend of price stability during the ‘Concentrated Consolidation Period’ and ensure the sustainable economic growth led by private-sector demand under price stability, the Government and the Bank of Japan will make joint efforts, sharing their basic perspectives on macroeconomic management.”