JAPAN

JAPAN

GVI BOJ Policy Meeting Preview Decision: July 15, 2008 Current Overnight Target Rate: 0.50% Expected decision: No change. Speculation about a future BOJ rate cut abounds. The economy has started to turn more mixed. The political situation also is unstable. BANK OF JAPAN Policy Objective: The Bank of Japan Law states that the Bank's monetary policy should be "aimed at, through the pursuit of price stability, contributing to the sound development of the national economy." The chart above shows year/year core nationwide CPI and the reported BOJ goal of between 0% and 2% for this price index.

The chart above shows the current three month libor rate, the current BOJ overnight rate target and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago. The chart provides a view on where the markets feel Japanese interest rates are headed.

The chart above shows the Japanese overnight rate target, three month libor, and two- and ten-year bond yields over the past twelve months.

The BOE cut rates at its April meeting as expected. Future rate reductions are now on hold due to inflationary pressures. Odds are the BOE policy is now on hold until yearend. The GBP had been under relative pressure due to worries about a sharply deteriorating economy.