Morning Brief – Japanese focus

On Monday stock markets opened in largely a neutral mode, with traders and investors largely digesting the events in Russian over the weekend which narrowly avoided going into a full-scale military mutiny.

The main focus during the Asian session was news from Japan as we saw some verbal FX intervention due to the Japanese yen currency continuing to fall.

This morning the verbal intervention was from Japan’s finance minister Suzuki who said he “will continue to watch the FX market with a sense of urgency” and “will respond appropriately if there are excessive moves”.

His comments caused all very limited response in the USDJPY pair as it traded around the 143.00 to 144.00 price range. Notably, this range is around the highest level of year.

Today we had the Bank of Japan ‘Summary of Opinions’ from its June meeting. The “Summary of Opinions” provides a concise summary of the views expressed by Policy Board members during the meeting.

Comments from members said that “There is strong chance consumer inflation will moderate, but won’t slow back below 2%, toward middle of current fiscal year”.

And on inflation the commentary was “inflationary pressure is likely to remain strong for the time being” and “Corporate behaviour has seen clear changes, and price and wage hikes have been incorporated into corporate strategy.”

One member called for early revision of YCC policy. The member said that while the BOJ should maintain its current monetary stimulus for now, since the cost of waiting to achieve sustainable 2% inflation is low for the BOJ’s overall easing program.

And finally, the reventing sharp moves in interest rates when the BOJ exits its current monetary easing, using yield curve control is costly, the member added.