• BOJ decision reflects BOJ caution on global financial developments

USD/JPY sits at 90.45, still stuck in 90-91 range.

Concerns remain that euro’s woes could affect yen.

Japanese authorities remain very much on the guard against any renewed yen strength.

• 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.

About comments made by Japanese PM Hatoyama in parliament. He feels the government needs to take steps against the yen’s recent strength, which he says doesn’t reflect Japan’s economic and industrial conditions (which as we well know are pretty dire) Hatoyama went as far as to suggest joint international action to address the issue.

USD/JPY steady around 90.55, but yen has weakened on major crosses.  EUR/JPY is up at 124.25 from early 124.05, while GBP/JPY up at 136.85 from early 136.45.

US investment house apparently out tipping USD/JPY at 109 by year end.  I’m with those guys (and gals)

• Closely watching BOJ’s decision next week
• Want ot attend next week;s BOJ meeting if possible
• BOJ has sense of crisis about Japan’s deflation
• Govt, BOJ share view Japan is in mild deflation. Both will do what they can to pull Japan out of deflation

With a deficit rising yearly, many Japanese believe that the heralded budget apocalypse has arrived.  Edmund Conway in The Telegraph.

• Some in government want BOJ to ease policy further
• Government won’t mention sales tax hike when crafting fiscal plan in June
• Economic outlook bleak. Can’t ask public to shoulder more tax burden before mid-year election
• Excess capacity, weak demand to prolong deflation

USD/JPY are 89.30, all but unchanged on the day.

So we’re unlikely to see official Japanese intervention anytime soon to arrest yens’ recent strength.  I doubt many really saw such a scenario as realisitic at present levels anyways. Might get a bit of Kampo buy interest, but that’s about it.

Meanwhile  Japanese officials have been out in force promising good fiscal discipline etc in wake of the S&P move earlier to revise outlook for Japan from stable to negative.

General risk appetite remains on the backburner, European stocks down, oil off close to a buck, gold at session low etc etc.

This is all keeping USD/JPY near its session low 89.39, presently at 89.47.

• Japan economic recovery unlikely to falter
• Economic risks roughly balanced
• Will communicate closely with government
• BOJ board ultimately decides policy
• Global economic recovery likely to slow, Japan price falls ahead
• Pace of Japan economic recovery may briefly slow in H1 of 2010/2011
• BOJ price forecasts do not reflect possible effect of government policy measures

Don’t have to worry about any intervention then. USD/JPY, like the market in general, not doing much of anything, presently at 90.15. 

The downside pressure  has been eased slightly by reports Bernanke looks likely to be re-confirmed as Fed chairman.

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