The JPY appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥91.25 level and was capped around the ¥92.55 level.The Japanese media reported the government and BOJ have now purchased a combined ¥491.7 billion in bank-owned stocks through the end of 2009 to support banks’ balance sheets and equities prices.
Conspiracy theorists are wagging about news that finance minister Fujii is ill with some Japan-watchers believing he could step down if his doctor requests so.
Some dealers believe the late-2009 rally in the greenback may have simply been traders covering dollar shorts and booking profits.
Notably, U.S. mutual funds reduced foreign holdings to 25.8% of total holdings in November from about 26% in October, a level that matched the record established in May 2008.
A further reduction in foreign holdings could increase demand for the U.S. dollar. Japan’s gross domestic product fell to an annualized ¥471 trillion in the third quarter of 2009, the lowest level since 1991.
The finance ministry is now predicting Japan’s tax revenue will decline to at least a 25-year low in 2010.
