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BOJ makes policy shift to open-ended easing – Jan 22

January 22, 2013

GMT 5:50 – JPY @ 89.10 = Now 88.50-70 is the key level. Suspect that we may have seen the correction. However, needs to push beyond 89.50-60 zones for continuation of rally or else 88.20

GMT 3:41 Euro @ 1.3322 = I think this time market is more keen to hear BOJ stance on its monetary policy because of the political involvement due to decades old economic sufferings faced by the Japanese economy. Though BOJ is an autonomous body and has a history of conflict between BOJ & MOF, but I see no harm in political intervention, which is practiced in all major economies.
We are witnessing governments interference and financial violation in allover Europe to such an extreme that they are forced to bring legislative changes as and when necessary, which in many situation is against the economic norms (unlimited amount of printing of money, unlimited lending to banks, size of deficit allowed and now big cut in spending).
Similarly, in USA it has become a regular feature to obtain congress approval to run country’s daily financial affair without a genuine plan at the expense of its future generation. There is no protest or a world from IMF, World Bank or Economic Gurus that how will meet or finance the deficit in future. The reason is very simple and obvious that the leveraging of word economy has reached such an extent that probably everyone is well aware of the consequences that could lead to disaster and therefore, yes, the financial world has reached point of no return in monetary terms, unless checked and allowed to correct that may also take years.   
Coming back to BOJ, it is severe under pressure from Shinzo Abe’s team to announce that easing is the only way out for Japan’s economic revival and may be forced to carry on with its policy targeting 2 pct interest rate and increase its asset purchase plan. Another option will be to reaffirm its commitment to buy foreign bonds and lastly it can stick back to its old strategy of zero interest rate policy. What I am not sure is that BOJ is already acting on above issues so what else could it announce to signal fundamental change in its policy? Probably BOJ Governor has to openly side with the newly elected Japanese government, which is not a common practice in developed economies.
Anything less could see Japanese currency correcting and strengthening before weakening again.

EURO @ 1.3322 = Euro has barrier around 1.3335-50 zones and needs to clear 1.3380, which may happen in European session and could see a dip towards 1.3280, break would encourage for 1.3255
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