The currency market remains caught in the crosscurrents of optimism about the structural reforms advocated by Prime Minister Junichiro Koizumi and fears of their deflationary impact.
The dollar-yen rate could remain locked within a narrow 121-123 yen range in the medium term amid uncertainty about what will ensue under his administration.
Although Koizumi has won an unprecedentedly high public approval rating, this hardly presages success in policy implementation.