The yen-dollar rate may stay locked in a relatively narrow range between 129 yen and 133 yen in the near term.

The currency market has reacted calmly to news that Standard & Poor’s has lowered Japan’s credit rating.

This weekend’s meeting in Washington of the Group-of-Seven industrial powers is not likely to have a major impact on the market either.

The main concern of late was the special bank inspections carried out by the Financial Services Agency.

The inspections found that Japan’s 13 major banks chalked up 1.9 trillion yen more in losses from their disposals of nonperforming loans for the year to March 31 than they projected earlier. Few took the figure as signaling an early end to the loan mess.

Fears over the slow pace of debate on tax cuts as part of additional antideflation measures are keeping the yen from gaining ground against the dollar, while concerns over heightened tensions in the Middle East are now weighing on the dollar.

The question now is how long the U.S. will continue its strong dollar policy.

Japanese pension funds are indicating they may accelerate their move into overseas markets in the new fiscal year, a dollar-bullish maneuver, while Japanese exporters are indicating they may unload their dollar holdings when the greenback rises close to 133 yen.

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