This helps explain the bond weakness. What happens when the treasury supply calendar accelerates in the second half of 04? I think Japan actually raised US rates for us, and that in turn strengthened the USD.
Japan Refrained From Selling Yen in the Past Month
April 30 (Bloomberg) -- Japan refrained from selling yen in the past month amid speculation the government is more willing to accept an 8 percent gain in the last year as the economy grows.
This was the first time since August that the Bank of Japan hasn't sold its currency. The central bank was also able to hold off as the yen dropped 5.4 percent in the past month. It sold record amounts earlier in the year, trying to protect the profits exporters such as Toyota Motor Corp. earn on overseas sales.
The Ministry of Finance release in Tokyo, which covers March 30 through Tuesday, comes after the government said Japan's jobless rate fell to 4.7 percent, the lowest in three years. The economy grew at an annual 6.4 percent pace in the fourth quarter, the fastest in more than 13 years.
``Japan's corporations look to be ready for slightly more appreciation in the yen, and domestic demand is picking up, allowing the authorities to hold off sales,'' said Xinyi Lu, chief strategist in Tokyo at UFJ Bank Ltd., a unit of Japan's fourth-biggest lender. ``The fact that the yen weakened during the period also helped the authorities.''
Japan's currency was at 110.16 per dollar as of 11:21 a.m. London time, versus 109.88 late yesterday in New York, according to EBS, an electronic foreign-exchange dealing system. It traded at 131.70 per euro from 131.43.
Tougher to Justify
Analysts at Citigroup Inc., the second-biggest trader in the $1.2 trillion-a-day currency market as ranked by Euromoney magazine, and J.P. Morgan Chase & Co., the fourth-biggest, said they didn't expect currency sales this month.
Analysts such as Junya Tanase at J.P. Morgan said evidence the economy is recovering made it harder to justify yen sales amid criticism from U.S. officials including Treasury Secretary John Snow.
``No one has devalued their way to prosperity,'' Snow said in a March 8 speech to the National Association of Treasurers in Washington. ``It's important currencies reflect demand and supply.''
The Bank of Japan, acting for the Ministry of Finance, sold a record 15.2 trillion yen ($137.9 billion) in the first three months of 2004, the period covered from Dec. 27 to March 29.
``Japan's drive to sell an unprecedented amount of yen is over,'' said Tsutomu Soma, who trades currencies and derivatives in Tokyo at Okasan Securities Co., speaking prior to the ministry release. ``An improved economy probably helped alleviate the government's fear of a stronger currency.''
Gains Threaten Growth
A rising yen threatens growth by sapping profits at exporters and making Japanese products more expensive abroad. Toyota, Japan's biggest carmaker, makes as much as 80 percent of its operating profit in North America.
Ricoh Co., Japan's second-largest office-equipment maker, said Wednesday it expects exchange rates of 105 yen to the dollar and 130 yen to the euro for the current business year.
Honda Motor Co. said Tuesday it forecasts rates of 105 yen per dollar and 125 yen per euro.
Honda's annual operating profit falls by about 112 billion yen for every 1 yen strengthening against the dollar and 2 billion yen against the euro, according to Koji Endo, an analyst at Credit Suisse First Boston Japan Inc.
The following table lists Japan's monthly yen sales through January 2003, based on figures from the Ministry of Finance and the Bank of Japan, in billions of yen.
2004
Apr: (Mar 30 to Apr 27) 0
Mar: (Feb 26 to Mar 29) 4,702
Feb: (Jan 29 to Feb 25) 3,342
Jan: (Dec 27 to Jan 28) 7,154
2003
Dec: (Nov 27 to Dec 26) 2,252
Nov: (Oct 30 to Nov 26) 1,600
Oct: (Sep 27 to Oct 29) 2,723
Sep: (Aug 28 to Sep 26) 4,457
Aug: (Jul 30 to Aug 27) 0
Jul: (Jun 27 to Jul 29) 2,027
Jun: (May 29 to Jun 26) 629
May: (Apr 26 to May 28) 3,983
Apr: (Mar 28 to Apr 25) 0
Mar: (Feb 27 to Mar 27) 1,196
Feb: (Jan 30 to Feb 26) 513
Jan: (Jan 1 to 29) 678 |
