Yen Rebounds As BOJ Underwhelmed

The Japanese yen rebounds broadly after markets are underwhelmed by BoJ's easing expansion. The central bank raised the assets purchase by JPY 11T to JPY 66T. The credit loan program was kept at JPY 25T. It's the first time since 2003 that BoJ eased policy for two months a a row and it pledged in the statement that it will "pursue powerful monetary easing aiming for 1 pct inflation and until that goal comes into sight."

Some analysts noted that JPY 10T is a minium expansion and anything below JPY 15T is disappointing. Also, analysts noted that problem in Japan is the lack of demands for loans due to deflation and yen's strength and the BoJ has so far failed to address the issues. And markets are starting to expect more easing from BoJ in Q1 already. The benchmark interest rate was kept at 0-0.1% today as expected.

In Germany, Chancellor Merkel is facing more opposition with her party regarding the Greece bailout conditionality. Veronika Bellmann, a policymaker in the state of Saxony, stated that she believed "there are many more doubters than before because everything we were led to believe, for example that Greece would only get aid in return for sticking to strict targets, simply hasn't been the case."

Over the weekend, Italy's former Premier Berlusconi threatened to bring down the government by withdrawing support for it. Berlusconi stated that "the initiative of this government is a continuation of a spiral of recession for our economy." He and his collaborators would "decide in the next few days whether it is better to immediately withdraw our confidence in this government or keep it, given the elections that are scheduled."

In US, Hurricane Sandy will keep stock markets closed for a second day today and focus will be on whether trading could be resumed on Wednesday. Yesterday, stock markets closed due to weather and bone markets closed early as Sandy lashed eastern coast. And, it is uncertain whether major data such as the employment report would be delayed due to the storm.

On the data front, Japan unemployment rate was unchanged at 4.2% in September while household spending dropped -0.9%yoy and industrial production dropped -4.1% yoy. Swiss UBS consumption indicator improved slightly to 1.07 in September. In the eurozone, confidence indicators are the main feature today while Canadian IPPI and RMPI will be released.