• Economy has been steadily picking up
• Maintains view deflation poses threat to economy
• Government repeats will work with BOJ to beat deflation, ensure econmic recovery
• Raises assessment on personal consumption, capex

Japan government official says escape from deflation still far off.

USD/JPY sits at 90.60, price action having easily been contained within 90.00-91.00 parameters over past 24 hours.

Supporting the pairing is focus on next weeks March 16/17 BOJ meeting and possibility of more easing/support measures.  Bloomberg quotes two anonymous BOJ officials as saying central bank may seek to expand 10 trillon yen fund that provides loans to banks.

On the flip side, acting as a counter-balance, are  reports of ongoing fiscal year end repatriation flows.

Buy orders tipped at 90.00/20, small stops just below.  Sell orders layered from 90.80 up to 91.20.

According to the Nikkei..

The market has been working all week under the assumption that the BOJ will expand at either the march or April meeting…USD/JPY is steady at 90.50.

Focus on next weeks March 16/17  BOJ meet and possibility of further steps.

USD/JPY been up to 90.50, presently at 90.45.

Reuters reports, that according to sources, the BOJ is leaning towards easing monetary policy again next week. But there is said to be disagreement among the seven policymakers on it’s board on how to justify such a move.

The BOJ meets March 16/17.

Tomorrow’s Nikkei newspaper says the BOJ is considering additional easing steps.

With an eye on nudging short-term rates lower, the Bank of Japan will likely consider more monetary easing through April….Policy board members will likely focus on expanding this market operation as a way to supply more liquidity to the market. For instance, this could mean supplying the funds for six months or increasing the total supply above 10 trillion yen.

Looks like that article helped push USD/JPY up to 89.25 earlier…

• Strengthening commitment to price target could hurt BOJ aim of price stability
• Doesn’t see much change in pace of narrowing in CPI falls since January forecast
• Doesn’t see need to change policy now
• Near-term price deviation from forecast wouldn’t lead to immediate policy change
• Hopes can escape deflation this year, no comment on gap between such desire and BOJ forecast

EUR/JPY trading lower, presently down at 120.60 from North American close Wednesday up around 121.15.  All I was hearing yesterday morning were reports of hedge funds selling this cross with no real success. Looks like their continued efforts are starting to bear a little fruit.

Just reading a report over Reuters newswires that the Japanese government have made an increased allowance in its 2010/2011 draft budget for foreign exchange intervention. This strikes me as unusual given that the new government were supposed to be much less interventionist. The new total war chest would then be 145 trillion yen which is a lot of intervention power. The report says that the government hasn’t intervened in the FX market in 6 years but that can only mean ‘through official channels’ as they have lots of other institutions such as Kampo which they use.

• Japan’s interest rates reflect expectations for slow recovery, falling prices
• Risk premium on Japan debt not rising due to market trust in govenment, BOJ policies
• Will aim to keep long-term raytes stable by guiding policy in way that gains market trust

USD/JPY sits at 88.95, happily ensconsed in well-defined 88.50-89′50 range, for now at least.  And I know it went to 88.48, but that doesn’t count.

• No comment on if thinking of further BOJ action now
• Japan’s fiscal balance in severe state
• Market always focusing on how government deals with fiscal woes

USD/JPY sits at 90.25, effectively unchanged from where it closed out Tuesday in North America with Asian trade confined to narrow 90.10-90.31 range.  Buyers emerged on dip below psychological 90.00.  There have been murmurings of toshin-related yen cross purchases, but if there have been they can’t have been significant.

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