Bank of Japan Seems `Powerless' to Halt Yen's Climb, Sumitomo Mitsui Says
The Bank of Japan’s decision to expand a lending program will have a limited effect on the yen because the currency’s gain versus the dollar is mainly driven by a U.S. economic slowdown, Sumitomo Mitsui Banking Corp. said.
The BOJ will boost the funds in the facility by 10 trillion yen ($117 billion) to a total of 30 trillion yen, the bank said today in a statement after an emergency meeting in Tokyo.
“Since the U.S. economy isn’t expected to turn around soon, any move by the BOJ is unlikely to change the yen’s rising trend,” said Daisuke Uno, chief strategist in Tokyo at the unit of Japan’s third largest banking group. “The market was too impatient to wait. There’s even a sense of powerlessness about the BOJ’s decision.”
The yen’s advance against the greenback is primarily driven by the narrowing of Treasuries’ yield advantage over Japanese bonds and the anticipation of stimulus measures by the Federal Reserve as U.S. growth slows, Uno said.
The U.S. economy grew 1.6 percent in the second quarter, less than originally estimated, the Commerce Department said last week. Factories expanded at the weakest pace in almost a year, an Institute for Supply Management report is forecast to show Sept. 1, according to a Bloomberg survey of economists.
Fed Chairman Ben S. Bernanke said last week at a conference in Wyoming that growth during the past year has been “too slow” and unemployment too high. The Fed “is prepared to provide additional monetary accommodation through unconventional measure if it proves necessary,” he said.
To contact the reporter on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.
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