Yen Stabilized Mildly After Massive Sell-Off

The Japanese yen stabilizes a bit today and the massive sell-off this week. Finance minister Jojima said that the current prime minister Noda had instructed the government to compile a fiscal stimulus package by the end of the month, including a possible supplementary budget. However, it's doubted that compilation of the extra budget would be difficult with the house dissolved.

Economy minister Maehara said that stimulus using reserve funds is insufficient to support the economy. Noda is expected to dissolve the lower house today which trigger an election, which would be held on December 16. And it's believed that BoJ might hold off from additional stimulus before the election. Nonetheless, the likely winner of the election, LDP leader Abe, would push for more aggressive policy to bring Japan out of recession, including unlimited easing, sub-zero interest rates and increase in public investment.

A key focus today will be US president Obama's meeting with Republican and Democratic leaders of Congress in at the White House on the issue of fiscal cliff. Obama and the Republicans remained divided over ways to resolve fiscal cliff. Obama blamed the Republicans for objection to his proposal on tax hike and predicted if they continued like that, "middle-class families are all going to end up having a big tax hike... That's going to be a pretty rude shock for them, and I suspect will have a big impact on the holiday shopping season."

Dallas Fed Fisher criticized that the Congress "has behaved disgracefully in discharging their fiscal duty." And he warned that only the Congress would save US from "fiscal perdition," not the Fed. Meanwhile, Fisher also noted that Fed cannot be "endlessly purchasing U.S. Treasury and agency debt."

Philadelphia Fed Plosser said that questioned if the open-ended QE3 would encourage investors to take excessive risk on impressive that Fed would also rush to save the housing industry. And Plosser warned that the bigger Fed's balance sheet is, the more difficult for Fed to exit in a way that meets our inflation objective without creating instability in the real economy, thereby undermining our credibility and reputation."

Overall, Plosser said it's a "fairly risky monetary policy." Richmond Fed Lacker also urged Fed to stand pat now "rather than easing policy further" as "[i]t's not clear whether monetary policy, by itself, can bring about any material improvement in economic growth right now." Nonetheless, Fed chairman Bernanke continued his pledge to use all policy tools to support economic recovery.

In Europe, Italian Finance Minister Grilli said that there are "several options" for Greece to fill the funding gap resulted from the two year extension of fiscal adjustment granted. And he's optimistic that EU finance ministers would come to a decision next week. IMF chief Lagarde will cut short the Asian tour to attend the Eurogroup meeting in Brussels on November 20. Lagarde said that it's important to focus on the "same objective" and that is to make sure Greece can "operate on a sustainable basis" and "reaccess markets as early as possible." Lagarde has openly dissented to EU finance ministers' decision to loosen up the target of lowering Greek debt to 120% GDP until 2022, rather than 2020.

On the data front, EUR current account and trade balance will be released in European session today. Canadian international securities transactions, US TIC capital flow and industrial production will be featured.