YEN INTERVENTION IMMINENT? BCA SAYS PROBABLY NOT (0900 EDT/1300 GMT)
Investors in the nearly $7-trillion currency market are on tenterhooks as to whether the Ministry of Finance through the Bank of Japan will actually deliver on its warning to intervene in the market to boost the weak yen.
On Wednesday, the BoJ conducted a rate check with banks on Wednesday in apparent preparation to step in to tame sharp yen falls. Finance Minister Shunichi Suzuki said authorities would make no advance announcement of plans to intervene, and usually would not confirm they had stepped into the market after doing so.
BCA Research joins a chorus of analysts who believes that Japanese authorities are unlikely to step in.
In its latest research note, the Montreal-based firm writes that "while sharp moves in the yen are unfavorable, policymakers will only respond if currency weakness is seen as impacting broader macroeconomic conditions."
In this case, it noted that a weak yen typically puts upward pressure on domestic inflation by increasing both import prices and yen-denominated overseas earnings.
But BCA says inflationary pressures remain relatively tame in Japan. The headline index grew 2.6% year-on-year in July -- significantly lower than other developed market economies where inflation rates are closer to double digits.
In addition, the index excluding fresh food and energy grew just 1.2% year-on-year in July - below the central bank's 2% target.
BCA's FX strategists recently estimated that the yen needs to weaken by 10% a year to generate a one percentage point increase in Japanese inflation.
"Ultimately, these dynamics suggest that while policymakers may attempt to jawbone the yen, they are unlikely to rush to support the currency."
The dollar was last up 0.1% at 143.43 yen.
(Gertrude Chavez-Dreyfuss)
(Reporting by Gertrude Chavez-Dreyfuss)