Bank of Japan Needs To Just Keep Holding Its Nerve

Talk about it. Threaten it.

But the last thing the Bank of Japan should do is intervene.

So far, the central bank has done good.

Unlike its central bank neighbors in Korea, Thailand and the Philippines, the Bank of Japan has resisted temptation to halt its currency’s rally against the dollar, even though the yen has risen to a fourmonth high at Y77.88 and isn’t too far way for its record high of Y76.50.

The country’s trade, economy and finance ministers all sallied forth to express their concerns as the yen rose.

A strong yen is hardly what Japan needs as the country struggles to recover from the devastation of the March 11 earthquake and tsunami.

But, intervention now will only make matters worse.

First of all, the yen’s strength is largely due to dollar weakness, a trend that is entirely out of Tokyo’s control and one that could intensify if there isn’t an early solution to the U.S. Read the full article…

China Surpasses Japan!

Overnight, Japan reported less-than expected GDP figures which allowed China to leap-frog into second place in global economic strength.  Japanese GDP came in at .4% vs. an expectation of 2.3%, which was a major disappointment.  This sent the Nikkei lower and the Yen higher, as risk aversion is mild but continuing from last week.

In the EU, CPI figures came in mostly in line with expectations, with July CPI falling .3% vs. an expectation of a .4% decline, and the headline figure matched expectations at an increase of 1.7% annualized.

Home prices in the UK fell 1.7% this month according to Rightmove, and the market is waiting for Wednesday’s minutes from the rate policy meeting which may show that the BOE is prepared to continue with accommodative policy to support the economy.

In the US, the Empire Manufacturing figures came in less-than expected, but higher than last month.  This months’ reading was at 7.10 vs. an exp

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