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BOJ Minutes Leave Yen Flat

By Terri Belkas
13 September 2006 07:17 GMT

The Japanese current account in the month of July rose slightly higher than anticipated to ¥1809.6B from ¥1016.7B the month prior, as exports gained a solid 13.6% year over year and the income account surplus rebounded to ¥1224B. The jump in imports of 19.2% year over year, however, caused the trade balance to miss consensus figures, as the surplus posted at ¥950.9B in July from ¥857.0B in June. Meanwhile, industrial production posted unrevised at -0.9% in July, leaving the annual rate at 5.1%, a two year high. In central bank news, the BOJ minutes said that the policy board “concurred that, if developments in economic activity and prices followed the Bank's projection presented in the April Outlook Report, it would be appropriate to conduct monetary policy in line with the thinking described in it. In other words, the Bank would adjust the level of the policy interest rate gradually in the light of developments in economic activity and prices, and in this process, an accommodative monetary environment ensuing from very low interest rates would probably be maintained for some time.” This statement is line with much of what the BOJ has been saying since their July hike to 0.25%, but board member Atsushi Mizuno brought a hawkish tone about in an interview with Bloomberg when she said, “Things are in line with our scenario. I want to emphasize that that means fine adjustments will continue to be made to interest rates...We haven't seen signs that the rising momentum of capital spending is easing.” With the tertiary index set to be released tomorrow, traders may be able to gauge whether the indicator is still consistent with an expanding economy. As of 7:07GMT, USD/JPY trades at 117.75, down from Tuesday’s New York close of 117.94.

Japanese stocks rose sharply on Wednesday morning, benefiting from overnight gains on Wall Street. This boosted chip-related stocks in particular – which had done well in the US. But some domestic sectors which had fallen in recent days, such as real estate and retailing, were also swept up by the optimism. The Nikkei 225 rose 1.1% to 15,885.37. The broader Topix was up 0.7% to 1,597.61. Among chip-related stocks, Tokyo Electron jumped 3% to Y8,220. Elpida Memory leapt 5.8% to Y5,620. But there was a general rise in export-focused stocks as a whole. The electrical machinery sector rose 1.8%, with transport equipment up 1.2%.  Sony, the consumer electronics and entertainment giant, bounced back after recent bad news over potentially defective batteries and a product delay, rising 1.8% to Y4,970.  Toyota, Japan’s biggest carmaker, climbed 1.6% to Y6,240. Nissan, its largest domestic rival, was 1% higher at Y1,297.  Among domestically focused stocks, retailers were up 1%, with real estate 0.9% higher. Mitsui Fudosan, Japan’s biggest property company, rose 1.5% to Y2,705. Mitsubishi Estate, its biggest rival, climbed 1.2% to Y2,610. Fast Retailing, which operates the Uniqlo stores, jumped 2.4% to Y10,610. But the Mothers index of smaller growth stocks continued its recent weakness, falling another 0.7% to 1,263.33.

Prices on 10 year Japanese government bonds rose slightly to 102.314 on the cautious BOJ minutes, sending yields down two basis points to 1.625%.

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13 September 2006 07:17 GMT