Gold & Yen Carry Trade...
Amateurs are speculating on anticipated Fed rate cuts and professionals are trading upon expected BOJ rate hikes.
Ron made a good point on the upcoming Japanese Elections. It's unlikely the BOJ will hike rates prior to the elections even with the strong arm-twisting from other central bankers. However, it's when - not if...
Here's a hint to the timeframe.
The question is when, not if - the gold market will anticipate this... (or, have they already (vbg)?
re: BOJ Minutes:
Tue May 22, 2007 4:24 AM ET
By Leika Kihara
TOKYO, May 22 (Reuters) - Japan's central bank is focusing more on rising land prices, its Policy Board minutes showed on Tuesday, while one of its most hawkish members said in an interview that it could discuss a rate hike as early as July.
At the Bank of Japan's April 9-10 meeting, many board members agreed it needs to pay attention to asset prices, pointing to data showing land prices rose for the first time in 16 years in 2006, a sign that asset price deflation has come to an end.
Some within the nine-member policy board also stressed that consumer price growth will pick up on capacity constraints and rising raw material costs, according to the minutes released on Tuesday, suggesting the central bank remains eager to raise rates further to keep on top of inflation.
Separately, Atsushi Mizuno, known as one of the board's most hawkish members, went a step further and suggested in an interview released on Tuesday that the BOJ will discuss as early as July whether to raise interest rates.
His remarks helped Japanese government bonds to trim gains and prompted modest buying of the yen, which hit a three-month low against the dollar on Monday.
"Some members said land prices have risen strongly in some parts of metropolitan areas, where property transactions have been active," the minutes showed.
"While prices of land are generally set in a way that is consistent with expected returns, close attention should be paid to asset price moves and their effect on economic activity", many members were quoted as saying.
At the meeting, the board voted unanimously to keep the overnight call rate target unchanged at 0.50 percent.
The BOJ has kept monetary policy on hold since raising the key policy rate by a quarter percentage point in February, which was the first rate hike since July last year.
The central bank has said it will raise rates gradually because keeping low rates for too long even as the economy recovers could hamper sustained long-term growth and cause misallocation of funds and resources.
But Japanese consumer prices have been weakening in recent months on falling crude oil prices, underscoring tame inflation and leaving many analysts to believe the next rate rise will not come at least until the July-September quarter.
JULY OPPORTUNITY
Market players who believed the BOJ would go slow on future rate hikes were caught off guard when Mizuno, in the interview with Jiji Press, said financial markets were too pessimistic on the economic outlook and that the BOJ's tankan quarterly corporate sentiment survey due out in early July could dispel such concerns.
While Mizuno said he had no fixed idea on when the central bank should raise rates, he also said the so-called "mid-term review" of the BOJ's half-yearly economic outlook report in July could be a good opportunity, Jiji reported.
"Within the next couple of months, we'll have the necessary data and environment that will give us a clearer picture on the economic outlook," Jiji quoted Mizuno as saying in the interview conducted on Monday.
He said the tankan will show an upward revision in companies' capital spending plan and ease pessimism in financial markets.
Mizuno also told Jiji that keeping rates too low could accelerate a fall in the yen.
He said the BOJ's policy will be based on the long-term economic outlook rather than near-term fluctuations in consumer prices, adding that it is not desirable for financial markets to focus too much on consumer prices.
The core consumer price index, a key price gauge that excludes volatile fresh food prices, fell 0.3 percent in March from a year earlier after a 0.1 percent drop in February, which was the first decline in 10 months.
Economists surveyed by Reuters expect data due out on Friday to show that the core CPI fell 0.1 percent in April.
Many economists expect core CPI to remain soft in the near future, making it difficult for the BOJ to raise rates.
In the BOJ's twice-yearly economic outlook report released on April 27, the board members produced a median core CPI forecast of a 0.1 percent rise for fiscal 2007/08, ending next March 31, and a forecast of a 0.5 percent rise for fiscal 2008/09. (Additional reporting by Hideyuki Sano)
yahoo.reuters.com
SOTB |
