Yen Traders Comment on BoJ Price Target

Bank of Japan Gov. Masaaki Shirakawa, who set the nation’s first inflation goal six months ago to halt a decade-long struggle with deflation, has failed to produce the weaker currency craved by exporters.

The yen slid as much as 8.8 percent against the dollar in the weeks after the BOJ shocked markets in February by announcing a 1 percent inflation target and expanding its asset-buying fund. The relief for exporters was fleeting, as the central bank has refrained from expanding stimulus since April and the currency resumed its climb toward a postwar record. Futures traders raised bullish bets to a five-month high as consumer prices continued their decline.

Blocking Shirakawa’s path to a weaker currency is the popularity of Japanese government bonds, which returned more than U.S., U.K and German debt after adjusting for inflation, attracting overseas demand for the securities and the yen needed to buy them. Battered by the stronger exchange rate, Sony Corp., Sharp Corp. and Panasonic Corp. have cut employees, earnings forecasts or both. Finance Minister Jun Azumi is calling for more measures from the central bank to stem gains.

“The BOJ did not deliver as much easing as was initially expected, and as a result, the yen also didn’t depreciate as much,” said Frederic Neumann, cohead of Asian economic research in Hong Kong at HSBC Holdings PLC. “The BOJ is seen as being very timid.”

via Japan Times

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza