18 December 2001, 12:27  : Yen takes another pounding as BOJ under pressure

By Natsuko Waki
The yen crumbled to a three-year low against the dollar for the third day in a row on Tuesday after a top Japanese official pressed the Bank of Japan for more measures to help the struggling economy.
Finance Minister Masajuro Shiokawa said more monetary easing was possible, thus spurring speculation the BOJ's board, which meets on Tuesday and Wednesday, could loosen policy yet further.
"The BOJ's meeting is the main focus and the yen will have another nervous day," said Lee Ferridge, head of global currency strategy at Rabobank.
"We don't think they will announce buying of foreign bonds because they haven't laid a political ground yet, so any changes are likely to be cosmetic. But people will put pressure on the BOJ to do more and that will create more room for yen weakness."
Traders said there was little that was actually new in Shiokawa's call and that BOJ Governor Masaru Hayami had already ruled out the more radical forms of easing such as increased buying of Japanese government bonds (JGBs) or purchasing foreign bonds.
By 0845 GMT the yen stood at 128.37 , having stumbled to a low of 128.43 to bring its losses in just a month to nearly six yen.
Dealers said the yen's outlook was showing no signs of brightening and a possible break of 129.00/10 area could trigger a flood of new selling to 136.90, lows hit in October 1998. Ferridge expected many market participants had already packed up for the year and a seasonal dearth of liquidity would further exacerbate the yen move.
The harried Japanese currency stood tantalisingly close to the two-year trough against the euro of 115.96 it hit on Monday.
The yen won no reprieve against other crosses, scoring new 2-1/2 year lows against sterling and the Swiss franc , as well as a fresh 11-month trough against the Australian dollar .
The single currency had less luck on the dollar, edging down to $0.9012 after recoiling from a $0.9082 one-month high on Monday.
Investors were focused on eurozone inflation data for November and industrial production figures for October both due at 1100 GMT.
Analysts said tame inflation data would fan talk of more rate cuts by the European Central Bank early next year.

CONCERN FOR NEIGHBOURS?
Shiokawa also called on the Bank of Japan to provide more than 14 trillion yen in liquidity in the run-up to the year-end.
Analysts were not especially impressed, noting the BOJ had already allowed the daily surplus to rise to near 14 trillion back in November and routinely provided massive liquidity for the year-end.
Anything more dramatic looked unlikely given Hayami had repeatedly ruled out purchasing foreign bonds or more Japanese government bonds (JGBs), buying commercial paper outright or adopting an inflation target. There has been some speculation Japan might become concerned if the yen tumbles further to around 140 yen as such rapid a fall could upset its Asian trading partners like China and trigger competitive devaluations in the region.
But others reckoned that cost would be worth bearing if the weaker yen could spring the world's second biggest economy out of stagnation.
"Japan's economy has to be kick-started. And the weakening of the yen is one of very few policy options left," a London-based Japanese dealer said. "But it might need to fall awful a lot, say to 180 yen, to actually have an impact on the economy."

© 1999-2024 Forex EuroClub
All rights reserved