You Can’t Stop Yen, You Can Only Hope To Contain Him

August 30th, 2010 by alyx · 3 Comments · loller dollar, zirp

Folks, consumer electronics shopping is gonna get a lot more painful this holiday season. The yen is rallying, the Bank of Japan is easing and the markets are shrugging:

Japan’s government offered a modest stimulus package Monday and the central bank took steps aimed at curbing the rising yen, but a tepid reaction from markets leaves policy makers under pressure to do more.

The 920 billion yen ($10.78 billion) stimulus is part of a double-barreled attempt to prevent the surging yen from undermining Japan’s fragile, export-led recovery. At an emergency meeting Monday, the BOJ’s policy board voted 8-1 to offer domestic financial institutions 10 trillion yen of six-month loans, in addition to the 20 trillion yen in three-month loans it has been offering.

The chairman of the Japan Automobile Manufacturers Association expressed hope the BOJ move will help weaken the yen. A strong yen makes Japanese products less competitive abroad, hurting key export sectors.

The move is largely considered to be the equivalent of throwing a bone (er…. a wonton?) to the local manufacturing industry, unlikely to have any long-term effect on the yen’s rise. If the BOJ wanted to make a significant impact, they’d need to buy bonds or get their ZIRP on. And they’re resisting that:

But he seemed to rule out one common suggestion: greater “quantitative easing” through stepped-up BOJ purchases of Japanese government bonds. “The current pace of outright government bond purchasing is the most appropriate,” Mr. Shirakawa said.

He also has resisted cutting policy interest rates, which have been at 0.1% since December 2008, to zero, fearing this would interfere with money-market functioning.

(Reports that a major car manufacturer threatened to point a number of recalled vehicles with so-called “accelerator issues” in the direction of the BOJ building if they failed to act are unsubstantiated at this time.)

In sum, get those Blu-Ray players and Lexuses while you can still afford ‘em, folks — it’s unlikely we’ll see a strong loller dollar vs. the yen any time soon. Much like the top in the euro was marked by supermodels demanding their contracts be paid in that currency, we’ll probably be able to call the top in the yen by waiting for 50 Cent to change his Twitter name over to @50¥, so I’m just going to wait for that to manifest.

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