BOJ

The Bank of Japan's Shirikawa spoke in Tokyo noting that the BOJ is putting equal emphasis on the upside potential as much as the downside risks.  He added that stabilizing inflation expectations is crucial and a point of emphasis. Additional notes to his statement are as follows:

• BOJ has no preset policy direction.
• Growth to slow further on rising costs.
• Core prices to keep rising above 1.5%.
• BOJ see's no signs of second round inflation.
• Economy can avoid deep adjustment
• BOJ weighs growth and inflation risks equally.

A few thoughts from the BOJ:

--A Few members saying they should be watching consumer inflation expectations and prices at most Japanese firms. 

--Saying that oil and food prices are not causing price effect. 

--Wage inflation remains tame in Japan. 

--One member urged pre-emptive monetary policy (which could mean rate hike):

The Bank of Japan is concluding its meeting today and it is most likely expected to keep interest rates the same at .5% which is unchanged over the past 20 consecutive months.  BOJ governor Shirakawa will speak after that and this may have an effect on USDJPY and cross movement for this evening's Tokyo trading session.  Although the BoJ has remained steady on their interest rate for close to the past two years, one of Japan's ex-currency chiefs Gyohten has reportedly said that the  BOJ could possible raise rates by 25 basis points in 2008  This news alone was enough to strengthen USDJPY to session low of 106 where it held fast and is currently trading around 106.07. 

• GLOBAL FINANCIAL MARKETS STILL VOLATILE
• GLOBAL INFLATION IS RISING
• ECONOMY SLOWING BECAUSE OF OIL, MATERIAL COSTS
• BOJ TO IMPLEMENT POLICY APPROPRIATELY
• JAPAN TO RESUME MODERATE GROWTH AFTER SLOWDOWN

• MEMBERS AGREED GLOBAL INFLATION RISKS WERE HEIGHTENING
• MEMBERS SAID BOJ MUST WATCH BOTH ECONOMY AND PRICES
• A FEW BOJ MEMBERS SAID NEED TO WATCH INFLATION EXPECTATIONS
• A FEW MEMBERS SAID BOJ SHOULD WATCH COMPANIES' PRICE-SETTING
• BOJ MEMBERS AGREED NEED TO WATCH UPSIDE AND DOWNSIDE RISKS
• ONE MEMBER SAID RESPONSE TO COMMODITY RISE GETTING DIFFICULT
• SOME MEMBERS SAID MUST WATCH AFFECT OF COMMODITIES ON ECONOMY
• ONE MEMBER SAID U.S.-TYPE CORE CPI MAY NOT SHOW PRICE TREND
• ONE BOJ MEMBER SAID CORE, TRIMMED CPI ARE EFFECTIVE TOOLS
• ONE BOJ MEMBER SAID MUST WATCH PRODUCER PRICES
• MANY BOJ MEMBERS IN APRIL SAID LOW RATES COULD CAUSE SWINGS

The yen has little reaction to the minutes.  Last at 107.90.  <

BOJ SHIRAKAWA:GLOBAL INFLATION RISKS ARE INTENSIFYING; CURRENCIES SHOULD REFLECT FUNDAMENTALS
- Global inflation risks are intensifying and sees further downside risk for the global financial markets  
- Adds that FX is not the ONLY factor when considering monetary policy  
- No plans to revise BoJ policy on jGB open market operations  
- Downside risks for both US and Japanese economy remain high  
- Says that BoJ to adopt the right policy for Japan for the sake of global economy  
- BoJ is closely watching inflation expectations, weakening income and domestic demand  
- Adds that fears regarding of US and European bank losses remains   
- Desires the economy to be strong and for FX to reflect that  

BOJ LEAVE ECONOMIC ASSESSMENT UNCHANGED IN JUNE; DOWNGRADES VIEW ON EXPORTS & CORP PROFITS
- Says economy is slowing on high energy and material costs
- Says Japan on moderate growth track
- Exports continue to rise but at a slower pace
- Corporate profits are falling on deteriorating trade conditions and to fall for some time before resuming its uptrend
BOJ SAYS EXPORTS CONTINUE TO RISE BUT AT A SLOWER PACE
- Economy to grow at a slower pace fro now and sees moderate growth in the future
- Corporate profits are falling on deteriorating trade conditions and to fall for some time before resuming its uptrend
- Japanese economy is slowing due to high energy and commodities prices
- Housing investment recovery to slow and then to end

Highlights from Shirakawa:

BOJ WILL IMPLEMENT FLEXIBLE POLICY; SPENDING FORMATION IN THE ECONOMY IS WEAKENING

Highlights from the BOJ's Shirakawa:

• The BOJ will hike rates if economic uncertainties clear
• Chance of U.S. economy stalling high over the near-term
• Japanese economic slowdown to continue for some time
• BOJ is closely watching inflation expectations
• Economy seen returning to a moderate expansionary path

Highlights from Shirakawa in his first press conference after JPY interest rate announcement:

• Sees no risk of economy overheating in Japan
• Japan economy to grow near potential growth rate
• Uncertainty on economic outlook high now
• Downside risks rising
• Positive cycle in Japan economy weakening but still intact