Minutes from October’s Bank of Japan monetary policy meeting revealed the central bank will maintain an “accommodative” financial environment and is prepared to reinstate emergency programs to buy corporate debt if additional support to business lending is required. That said, policymakers reiterated that, in spite of a number of downside risks, the economy remains on a path to sustainable growth. The language suggests the BOJ is paying lip service to the government’s insistent calls for the central bank to deal with deflation in a bid to keep the central bank’s asset-buying programs in place. These programs have been a source of persistent tension between the BOJ and the Ministry of Finance, with the BOJ eager to unwind them while the MOF prefers to see them continue as a way for the government to keep long-term borrowing costs in check as it prints bonds to cover Japan’s soaring budget deficit.
For their part, the Japanese government seemed more concerned with the exchange rate as the Japanese Yen traded to a 14-year high against the US Dollar. Cabinet Secretary Hirofumi Hirano said the administration was closely watching developments in the FX markets, while Finance Minister Hirohisa Fujii went a step further to say that action needs to be taken against “abnormal” currency movements. It is unclear if this is a toothless attempt to talk down the Yen or whether actual intervention is ahead, but traders were indifferent to the announcement with USDJPY moving up a mere 12 pips as the comments crossed the wires before resuming a plunge below the 87.00 level.
In Australia, Private Capital Expenditure tumbled -3.9% in the third quarter, sinking expectations of a 1% advance. However, the Australian Bureau of Statistics noted that it made a number of changes in the way the metric is computed, saying that “caution should be exercised in using [this data] as an indicator of [business investment as a portion of GDP].” This means the drop-off may not keep the central bank from raising interest rates again in December. Still, traders were noticeably spooked by the announcement, with a Credit Suisse gauge of priced-in rate hike expectations showing investors now see the probability of a third consecutive 0.25% increase at 65%, down from 76% yesterday
For their part, the Japanese government seemed more concerned with the exchange rate as the Japanese Yen traded to a 14-year high against the US Dollar. Cabinet Secretary Hirofumi Hirano said the administration was closely watching developments in the FX markets, while Finance Minister Hirohisa Fujii went a step further to say that action needs to be taken against “abnormal” currency movements. It is unclear if this is a toothless attempt to talk down the Yen or whether actual intervention is ahead, but traders were indifferent to the announcement with USDJPY moving up a mere 12 pips as the comments crossed the wires before resuming a plunge below the 87.00 level.
In Australia, Private Capital Expenditure tumbled -3.9% in the third quarter, sinking expectations of a 1% advance. However, the Australian Bureau of Statistics noted that it made a number of changes in the way the metric is computed, saying that “caution should be exercised in using [this data] as an indicator of [business investment as a portion of GDP].” This means the drop-off may not keep the central bank from raising interest rates again in December. Still, traders were noticeably spooked by the announcement, with a Credit Suisse gauge of priced-in rate hike expectations showing investors now see the probability of a third consecutive 0.25% increase at 65%, down from 76% yesterday
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