All Eyes on the Bank of Japan (FXY)

The Japanese Yen strengthened again Monday, increasing pressure on the Bank of Japan to solve the nation's currency issues and the prospect of deflation. The CurrencyShares Japanese Yen Trust

closed up 0.5% today, to $116.17. According to a New York Times report, "recent signs of a Japanese recovery now seem to be fading: The economy grew an anemic 0.1 percent between April and June. Meanwhile, a strengthening yen, which hurts Japan by making its exports less competitive, has many people calling for the bank to further ease its monetary policy to shore up the economy — if not outright government intervention in currency markets." Further throwing confusion into the equation was the decision by Prime Minister Naoto Kan and the governor of the Bank of Japan, Masaaki Shirakawa, to not hold a highly anticipated meeting. The two held a 15-minute phone call instead. “There was absolutely no talk” of currency intervention in their conversation, Yoshito Sengoku, the government’s top spokesman said. “The government has again taken a wait-and-see attitude,” Norio Miyagawa, a senior economist at Mizuho Securities Research and Consulting told the Times. “The truth is, there are no quick fixes, but markets are disappointed that they got nothing at all.” The Times report notes that "In Japan, companies remain unsure of how much to invest, because deflation makes it unclear how much they can sell — and for how much. Households have little incentive to spend, knowing goods and services will get cheaper the longer they wait." Whether the nation can escape its recent scrape with the currency market remains to be seen. Pressure will certainly continue to build on government officials to intervene should the Yen appreciate further.