Japanese yen is surging amid growing doubts that Japan will actually go for an aggressive stimulus package.
The currency is stronger by 1.4% at 104.34 per dollar at 7:28 a.m. ET.
A Nikkei report indicated that the government plans a direct fiscal stimulus of around 6 trillion yen over the next few years, which although would be about twice the amount that was originally planned, would be less than what markets were hoping for.
The total size of the package will be announced as soon as August 2, Nikkei reported, according to Reuters.
Moreover, Taro Aso, Japan’s finance minister, said on Tuesday that the government has yet to make a final decision on the size of a recently-announced fiscal stimulus package. He added that “it was up to the Bank of Japan to decide what steps to take in terms of monetary policy, and that he hoped the BoJ would do its utmost to push inflation to the target rate of 2%,” according to FT.
“In our discussions of the fiscal stimulus, we have emphasised the distinction between the inflated headline figure, puffed up by rolling up other programs and commitments, and the fresh water figure, which is the stripped down new news,” wrote Marc Chandler, the global head of currency strategy at Brown Brothers Harriman, in a note.
“We read yesterday’s report that the stimulus that was going to be JPY6 trillion instead of JPY3 trillion to be referring to the fresh water. Today’s comment by Finance Minister Aso that the size of the package, expected as early as next week, as not been decided yet only adds to the uncertainty and confusion,” he continued.
The Bank of Japan will meet on Friday. And now markets seem to be even less certain of what the bank will do.
“And even if one knew what the BOJ was going to do, there is not much confidence in anticipating the yen’s direction,” added Chandler.
As for the rest of the world, here’s the scoreboard:
- The Australian dollar is stronger by 0.7% at .7525 per dollar, after jumping as high as .7535 earlier in the day. “The move may have been sparked by a steep decline in the USD/JPY,” suggested Business Insider Australia’s David Scutt.
- The US dollar index is down by 0.2% at 97.07 ahead of a saturated data day. S&P Case-Shiller Index will be out at 9 a.m. ET, Markit US Services PMI will be out at 9:46 a.m. ET, and consumer confidence and new home sales cross the wires at 10 a.m.
- The euro is little changed at 1.1002 against the dollar
- The British pound is little changed at 1.3121 against the dollar
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