Yen Climbs Against Peers Even After BOJ Eases Policy

The yen climbed against all of its major counterparts as the Bank of Japan (8301)’s second round of easing in two months disappointed some investors expecting more.

The BOJ expanded its asset-purchase program by 11 trillion yen ($138 billion) to 66 trillion yen, the central bank said after a policy meeting today. The Nikkei newspaper reported earlier that the BOJ may increase the program by 10 trillion yen. Demand for the yen as a refuge asset increased as Sandy, the largest tropical storm system on record, ravaged the American Northeast coast and before reports that may show Europe’s debt crisis is damping growth.

“The 10 trillion-yen increase was seen as a minimum expansion, and the failure to reach 15 trillion yen is very disappointing for markets,” said Yunosuke Ikeda, head of Japan foreign-exchange research at Nomura Securities Co., the nation’s biggest brokerage. “The yen is being bought as risk sentiment is worsening in part because of Sandy.”

The Japanese currency reached 79.28 per dollar, the strongest since Oct. 22, before trading at 79.47 as of 7:20 a.m. in London, 0.4 percent higher than yesterday’s close. The yen gained 0.2 percent to 102.77 per euro. Europe’s common currency fetched $1.2932 from $1.2904.

U.S. stock trading will be canceled for a second day after Sandy made landfall in New Jersey. The storm froze travel, spurred evacuations and could potentially affect 60 million people.

Inflation Target

Fifteen analysts expected the BOJ to add 10 trillion yen to its 55 trillion yen program that buys assets such as government bonds, real estate investment trusts and stock funds, according to a Bloomberg News survey. Four economists saw it increasing purchases by as much as 20 trillion yen.

“The outcome is basically as expected,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “We’re in a ‘buy the rumor, sell the fact’ move for the yen at the moment.”

The BOJ doesn’t expect to meet its 1 percent inflation target in the period through March 2015. Japan’s consumer prices excluding fresh food will rise 0.4 percent in the year starting April next year and 0.8 percent in fiscal 2014, after subtracting the effect of a planned sales-tax increase, the central bank said in a statement today.

Japan’s industrial production slid 4.1 percent in September from the previous month, the most since last year’s earthquake and tsunami in March, government data showed today. The drop exceeded the most pessimistic estimate of economists surveyed by Bloomberg.

Nissan Motor Co. Chief Executive Officer Carlos Ghosn said his company may have to move away from Japan to survive as the strong yen diminishes the nation’s competitiveness.

“If the exchange rate is high, we move out,” Ghosn said in Tokyo today. The yen’s “neutral range” is 100 to the dollar, he said.

‘Aggressive’ Policy

“You really do need a much more aggressive monetary policy to try to get the yen weaker, to try to offer a bit of relief to the manufacturing sector,” Richard Jerram, chief economist at Bank of Singapore Ltd. said in an interview on Bloomberg Television. “The yen will be down at 88 in a year’s time against the dollar as a result of the more aggressive monetary policy coming out of the BOJ.”

In Germany, the number of people without a job probably increased by 10,000 in October, according to the median estimate of economists surveyed by Bloomberg before a report due today from the Federal Labor Agency. That would be a seventh-straight month of increased unemployment.

Separate reports may show Spain’s economy contracted in the third quarter and confirm an earlier reading on euro-area consumer confidence that was near a three-year low.

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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