Yen Mildly Higher As BOJ On Hold

Yen is mildly firmer today after BoJ kept rates unchanged at near 0% and maintained its massive monetary stimulus as widely expected. That is, it will continue to increase the monetary base by JPY 60-70T a year. The central bank noted that the economy is "recovering moderately", unchanged from prior assessment. Meanwhile, it noted that capital expenditure is "picking up as corporate profits improve" affirming the view express in last statement. Also, it said that housing investments have also increased. Meanwhile, the BoJ also maintained the pledge to keep monetary easing as long as needed to achieve the 2% inflation target.

Meanwhile, the partial government shutdown in US continued. House speaker John Boehner was reported to have told other Republican policymakers that he would avoid a Federal default. Meanwhile, several Fed presidents talked about the impacts of the shutdown. Boston Fed President Eric Rosengren stated that while the Fed might mitigate the impacts of the government shutdown, it would not be able to offset them. Rosengren warned that it is "very unpredictable what would happen if we did breach the debt ceiling and weren't able to get an agreement". He also stressed the importance of having "a fiscal policy that's aligned with monetary policy". Regarding the Fed's decision to not announce QE tapering in September, Rosengren supported the decision as "the economic data didn't come in as strong as" the policymakers had anticipated. The Fed has "had a forecast of improvement" but the central bank still has to see the data in coming quarters.

San Francisco Fed President John Williams warned that the failure to raise the debt ceiling would have negative consequences for global economy. According to Williams, "the Treasury security is the global kind of currency for financial markets. It is the bedrock of our financial system". He added that if the people do not trust that the US government has the ability to pay its bills, that would undermine confidence in the global financial system". Meanwhile, Atlanta Fed Lockhart warned of the impact of the shutdown on the GDP growth in 4Q13. As the same time, he warned that "events like the government shutdown or conceivably a debt ceiling debate that undermines confidence has a lasting effect in that it makes our economy look more prone to politically induced shocks".

On the data front, German PPI dropped -0.1% mom, -0.5% yoy in August. Canada will release Ivey PMI later today. US non-farm payroll release was cancelled due to government shutdown.