Daily Report: Yen Recovered As BoJ Offered No Surprise

Yen recovers after BoJ announcement today offered no surprise to the markets. As widely expected, the BOJ expanded the asset buying program to stimulate the economy and combat inflation. The overnight call rate target was left unchanged at 0-0.10%. The central bank also indicated the plan to review the guidelines for medium- and long-term inflation, which is now set in a range of 0-2%.

With the landslide victory by the LDP, the BOJ is expected to face more political pressure and would push for more aggressive conventional and unconventional monetary easing. However, for the moment, the inflation target is maintained at 1.0%. USD/JPY is back below 84.0 level for the moment while EUR/JPY and GBP/JPY also retreated. We'd probably see more consolidative trading in the yen in the near-term before the downtrend resumes.

In the US, markets are dissatisfied on news that the negotiations between President Obama and House Speaker Boehner have deteriorated in the past 24 hours. Obama said that he has already offered Republicans a "fair" deal that they have to take. The latest proposal from Obama include raising revenue by $1.2T in 10 years. The threshold for tax increase is 400k per annum. Boehner's so called "plan B" would raise taxes on households making more than USD 1M a year together with other government spending cuts.

Obama threatened to veto this "Plan B" if the Congress approved it, claiming that the plan would put "too big a burden on the middle class". Regarding this, the GOP stated that "the White House's opposition to a backup plan... is growing more bizarre and irrational by the day" and believed that the House would pass the legislation on Thursday. Meanwhile, Boehner said that if Obama doesn't accept his proposal, Obama would be responsible for "the largest tax increase in American history."

On the data front, New Zealand GDP rose 0.2% qoq in Q3, worse than expectation of 0.4% qoq. China conference board leading indicator rose 1.1% in November. Swiss trade surplus widened to CHF 2.95b in November. German PPI rose 1.4% yoy in November.

UK retail sales will be the main focus in European session. Canada retail sales would also be released later today. From US, Q3 final print of GDP would be released, with jobless claims, Philly Fed survey, existing home sales, house price index and leading indicators.