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To: YanivBA who wrote (54246)	8/3/2006 9:35:11 AM
From: regli	Respond to of 116555

I guess this is all to provide support for the Yen. But again, why? What does the BOJ have to gain from a strong Yen? Surely it's not to fight inflation. I just don't get it!"" I am wondering if they are preparing for a revaluation of the Yuan. It might very well be that high oil prices are beginning to bite in Japan and that it has become obvious that linking the Yen to the dollar also has its drawbacks.

To: YanivBA who wrote (54246)	8/3/2006 9:38:09 AM
From: Moominoid	Respond to of 116555

That is what I figure. Central Banks set an interest rate as well as reserve ratio requirements and then they have to respond to market changes in the interest rate by buying and selling bonds to keep on target.

To: YanivBA who wrote (54246)	8/3/2006 11:04:51 AM
From: shades	Respond to of 116555

IMF Rato: Don't See Japan Inflation Pressures Now What does the BOJ have to gain from a strong Yen? Surely it's not to fight inflation. I just don't get it! TOKYO (Dow Jones)--The International Monetary Fund doesn't see signs of inflationary pressure in Japan right now, but the Bank of Japan should act if it sees such pressures, the organization's managing director said Thursday. Describing recent developments in Japan as "really encouraging," Rodrigo de Rato said at the Foreign Correspondents' Club of Japan that both the Japanese economy and the yen are very strong. Japan's central bank raised interest rates for the first time in almost six years last month amid signs that mild increases in retail prices were taking root, and has hinted at the chance of another hike this year. But in its annual review of the Japanese economy released last week, the IMF said the BOJ should retain an accommodative policy stance in the near term. Asked whether another rate rise was appropriate under current economic conditions, Rato said the BOJ's deft handling of monetary policy up to now should inspire confidence in the bank's decisions. "The Bank of Japan is a very respected institution and has proven to be capable not only of facing the very difficult task of reducing or rooting out deflation, but also changing monetary policy in a very smooth manner under quite unique circumstances," Rato said. While the IMF doesn't at present see inflationary pressures in Japan, "if the case will be that the Japanese central bank will receive inflationary pressures, there is no doubt it should act," he said. He added that a reference for price stability would help the bank improve communication. BOJ board members have said they define price stability as inflation in a range of zero to 2%. On a global perspective, Rato noted that while central banks in the world's major economies were moving toward more neutral monetary policy, they faced threats to inflation because of high oil prices or low spare capacity. But national conditions vary greatly and individual central banks should be highly sensitive to their own country's conditions, he said. "What we advise central bankers is, first of all, to be very vigilant on inflationary expectations, and at the same time be aware of the inflationary expectations in each economy," he added. Domestic Reform, Mkt Flexibility Are Imbalances Cure Regarding Japan's economy, Rato said the most pressing challenge would be to put Japan's fiscal house in order. Japan's general government budget deficit is likely to stand around 5.0% of gross domestic product this year, while its public debt is about 90% of GDP. Further challenges will be to lift Japanese potential growth and for the BOJ to implement a post-deflation strategy to support sustainable and non-inflationary expansion, he added. Turning to global imbalances, Rato stressed the need for domestic reforms in individual nations to enable world economic expansion to continue at a high level. "We believe that narrowing global payment imbalances, like we see in the large current-account deficit of the United States and also in the large surpluses in the external accounts of other countries, like China, Japan and Saudi Arabia, is key for maintaining robust global growth," Rato said. He added that he hoped that the IMF's new multilateral consultation process would provide a vehicle to advance the tackling of global imbalances, but he cautioned that as the imbalances themselves didn't accumulate overnight, so solving them would also take time. Moreover, for rebalancing of demand to occur, market forces must be allowed to allocate resources more freely in both surplus and deficit countries, and currency regimes are an important instrument of that, he said. -By Natasha Brereton, Dow Jones Newswires; 813-5255-2929; natasha.brereton@dowjones.com (END) Dow Jones Newswires August 03, 2006 11:01 ET (15:01 GMT)