“Continued inaction by the BOJ in the face of these risks only reinforces the market’s suspicions that the central bank is running out of policy options, feeding back into a stronger yen”, HSBC economist Izumi Devalier said in a note.
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The U.S. current account deficit widened to a more than seven-year high in the first quarter as goods exports fell and investment from overseas declined. Seoul shed 0.5 percent and Singapore 0.6 percent.
While the Bank of Japan’s decision to leave its massive 80 trillion yen asset-buying plan unchanged this month was of no great surprise, the lack of action contributed to jitters over the wider slowdown in the world economy.
But many BOJ officials prefer to hold off on expanding stimulus, clinging to hope that an expected pick-up in economic growth later this year will push up wages and offset falling goods prices, they say.
Recent British opinion polls show the in and out camps to be neck and neck ahead of the June 23 referendum, making it hard for investors to bet on either outcome. “We’ll closely coordinate with other countries on this issue”, said Aso, adding that he was watching the market with a sense of urgency to prevent speculative moves from persisting.
THE FED: The Federal Reserve said Wednesday it was keeping interest rates unchanged in light of an uncertain job market, offering no hints of when its next rate hike might occur.
The broader Topix fell 2.8 percent to 1,241.56, its lowest level since mid-February.
Its additional negative interest rate policy is aimed at stoking bank lending and therefore spending and inflation.
The New Zealand dollar dropped to 49.53 British pence from 49.90 pence yesterday after the Bank of England kept monetary policy unchanged and said it had contingency measures ready if required following the UK’s vote on European Union membership next week.
“There is nothing in recent economic indicators that would lead the BOJ to change its economic outlook now”, Norio Miyagawa, senior economist at Mizuho Securities, told Reuters.
The weekly spike high in May 2013 falls at 103.73 and would be viewed as support, as the pair bounced from the area earlier today.
Most other companies have assumed a dollar/yen exchange rate of 110-115 yen in the current financial year for their earnings estimate, suggesting many profit outlooks will have to be lowered.
“Although the Fed’s projection tout two rate hikes, a rate hike in July is highly unlikely, which makes it questionable whether the Fed can raise rates twice in its three policy meetings left by the end of year”, said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
CURRENCIES: The dollar fell sharply against the Japanese yen, trading at 104.09 yen compared with 105.98 the previous day.
The Nikkei Stock Average closed up 1.1%, while the Hang Seng Index was up 0.7% and the Shanghai Composite Index rose 0.4%.
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United States benchmark West Texas Intermediate was down one percent at $47.52 and Brent shed 0.8 percent to $48.56.
