Historic Bank of Japan Two-Day Policy Board Meeting Began

January 21, 2013

Currency markets will lack U.S. leadership today.  It’s Martin Luther King Day, and attention will be fixed on the Obama inaugural speech.

A warning directed at China by U.S. Secretary of State Clinton against a unilateral action in the Sino-Japanese Island dispute drew criticism from China’s Foreign Ministry.

Euro area finance ministers began a two-day meeting in Brussels that will select a new president of the group to follow outgoing Juncker and to discuss aid to Cyprus.

Greece’s troika of creditors agreed not to impose further austerity measures on that economy for the next six months.

German Prime Minister Angela Merkel has suffered a political setback.  In Sunday’s regional election in Lower Saxony, the Center-Left Social Democrats and Green Party captured 69 seats, one more than the Christian Democrats and Free Democrats, who previously held power in that state and who also are the majority in Germany’s National government.  National elections are scheduled for September. 

There is still suspense over exactly what a joint Bank of Japan-Japanese government statement on monetary policy will say.  The central bank began a two day meeting and will announce actions on Tuesday.  The inflation target is likely to be raised to 2%, and more quantitative easing seems probable. 

After touching overnight highs of 90.265 per dollar and 120.26 per euro, the yen has strengthened to 89.52/USD up 0.6% on balance compared to the Friday close.  The Nikkei-225 index stumbled 1.5%, and the 10-year Japanese JGB yield slid two basis points to 0.74%.

The dollar otherwise shows tiny changes, gaining 0.2% versus the loonie and kiwi and 0.1% relative to the yuan and euro.  The greenback is down 0.2% against the Swiss franc and 0.1% versus the Australian dollar and unchanged relative to sterling.

Share prices plunged 2.4% in Malaysia and fell 0.6% in Indonesia and 0.1% in Hong Kong, Taiwan and South Korea.  Equities have firmed 0.6% in China, 0.5% in New Zealand and the Philippines and 0.1% in Australia.  In Europe, the German Dax is 0.4% stronger, while the Paris Cac and Spanish Ibex have risen 0.3%.  The British Ftse is 0.2% firmer.

Ten-year British gilt and German bund yields are up four basis points each.

West Intermediate oil prices have slipped 0.5% to $95.08 per barrel.  Gold edged 0.1% higher to $1688.20 per ounce.

German producer prices in December unexpectedly dipped 0.3% on month, posting a 1.5% 12-month rate of increase compared to a rise of 4.0% between December 2010 and December 2011.  On a full-year basis, the PPI climbed 2.1% last year after advancing 5.7% in 2011.  Non-energy producer price inflation slowed to 1.3% from 3.5% in 2011.

Swiss industrial production increased 2.2% in the year to 3Q12, down from an on-year advance of 4.7% in the second quarter.  Swiss M3 money growth accelerated to 9.8% last month from 9.4% in November.

Britain’s Rightmove house price index rose 0.2% in January, the first increase since October.  The on-year increase was 2.4% after a 1.4% rise in the year to December.

Dutch consumer confidence improved four points to a reading of minus 35 in January.  Existing home prices were 6.3% lower in December than a year before.

The preliminary estimate of a 27.5% on-year drop in Japanese machine tool orders in December has been confirmed in revised figures.

Hong Kong consumer prices went up 1.2% sequentially in the fourth quarter and posted a December-over-December increase of 3.7%. Taiwanese export orders fell 3.3% on month by rose 8.5% in the year to December.

U.S. markets are closed today.  Canadian wholesale turnover data will be released.  The eagerly awaited Bank of Japan press release should arrive in Tuesday’s early afternoon Japanese Standard Time (shortly after midnight on the U.S. east coast).

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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