Mixed and somewhat weaker-than-expected economic data of late compelled the Bank of Japan to maintain its target overnight call rate at 0.25%. The BoJ's decision was unanimous and widely expected by economists. Consistently disappointing consumption data due to weakness in wages growth was a key catalyst. Takehiro Sato, economist at Morgan Stanley Japan commented ahead of the meeting that "(The costs of delaying) aren't that high and given that the economic statistics are expected to show the economy rebounded in the fourth quarter we expect them to raise rates in January." Regarding a January hike, BoJ Governor Fukui said, "We will carefully analyse data that comes out until the next policy meeting and reach a decision, but we have no preconception." Separately, the Finance Minister announced the GDP deflator will turn positive in 2007-08, a sign "... the economy will become normal." The Nikkei 225 lost 1.1% and the broader TOPIX fell 1.2%, mostly on profit taking. The yen gave up earlier gains to trade above ¥118/$1, again.
• Sources: Bloomberg, FT.com
• Related commentary: BoJ's Tankan Improves In-line, Stocks Higher, Dollar Reverses Course Against Yen, Japanese Stocks Jump, Data Dependent Japanese Investors Have Eyes On BoJ, Positive Economic Data Supports Japan Stocks
• Potentially impacted stocks and ETFs: Mitsubishi UFJ Financial Group (NYSE:MTU), Mizuho Financial Group (NYSE:MFG). ETFs: iShares MSCI Japan Index (NYSEARCA:EWJ), iShares S&P/TOPIX 150 (ITF)
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