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Bank of Japan: Damned if you do…

February 22, 2007
By Ken Worsley


Bloomberg’s headline: Yen Trades Near Record Low as Japan’s Rates Promote Carry Trade

A short bit:

The yen traded near a record low against the euro after Bank of Japan Governor Toshihiko Fukui said his board will hold interest rates ‘as low as possible.’

So, Fukui (or the BOJ) is to blame for the carry trade? Talk about being caught between a rock and a hard place. The people who write these articles must know that the highest projected raise in Japan’s interest rates for 2007 is up to 1%, and even that is pushing it, given the absence of a pickup in consumer spending. I mean, seriously - they must know that.

A quote from Osao Iizuka, head of foreign exchange trading at Sumitomo Trust & Banking:

The yen will be sold. The BOJ didn’t give a clear picture of when the next rate hike will be. The time is right to get back into the yen carry trade.

Back into? Who the hell pulled out? The rate was going to either stay at 0.25% or go from 0.25% to 0.50% - either way it’s good for the carry trade. Either way the yen would continue to get sold. As we pointed out on February 13th, another test of the 122 level is to be expected, as it hit that resistance level on January 29 and February 13. Guess where the yen is right now? 121.41, up from 119.10 two days ago.

Filed Under Bank of Japan, Exchange Rates, Japan 

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Comments

2 Responses to “Bank of Japan: Damned if you do…”

  1. Joe on February 23rd, 2007 5:14 am

    Well, *I* used to say that my name was Mario and I worked for the Bank of Italy. That only worked on the denser girls, though.

  2. Ken on February 23rd, 2007 8:35 pm

    Joe, it would be even better if you were out with a guy named Luigi. Would probably work just as well, too.

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