Published at 01:58 (GMT) 21 Nov

US Index, USD/JPY Flows: NKS: LDP Promises Govt-BOJ Pact On 2% Inflation Tgt (EBWC5401)

NKS: An agreement with BoJ to work toward meeting a 2% inflation target will be one of the LDP's campaign promises for the Dec. 16 lower house election, The Nikkei learned Tuesday. Defeating deflation and the strong yen is the utmost priority for the LDP under Shinzo Abe's leadership. Its campaign promises, to be unveiled Wed by Abe, will include a proposal to consider setting lower rates for food and other items when implementing the planned consumption tax hikes.

Creating a mechanism for strengthening cooperation between the government and the central bank, possibly by revising BoJ Law, will be another pledge. It will oppose Japanese participation in the Trans-Pacific Partnership free trade negotiations as long as the pact is predicated on the removal of tariffs without exception.

On FX, focus now on the Campaign platform of the opposition LDP, with LDP Chief Shinzo Abe seen as the PM-in-waiting, favourite to win the Dec 16 elections. Cross/JPY supported on expectations of more BOJ easing. USD/JPY at 7-half month highs around 81.84-85, supported on fixing demand, but offers ahead of 82.00 option barriers. Bids at 81.40-50. USD INDEX at 80.924, vs recent 10-week highs of 81.455, highest since Sep 5 81.667. Could test 81.00 again, as EUR, AUD, GBP look toppish at current levels. EUR/USD at 1.2810-12, AUD 1.0383-85, GBP at 1.5922-25. WL