The Japanese yen weakened to a 16- month low against the euro on speculation the government will step up stimulus to support growth. Metals advanced before U.S. lawmakers meet for budget talks and German government bonds fell as Italy prepares to sell debt. The yen fell 0.3 percent to 113.62 per euro as of 8:23 a.m. in London and touched the lowest since September 2010 versus the dollar. Copper added 1.7 percent in London. German 10-year yields rose one basis point to 1.39 percent. The Stoxx Europe 600 Index and futures on the Standard & Poor’s 500 Index declined 0.1 percent. The Nikkei 225 Stock Average closed at the highest level since March 10, 2011, the day before an earthquake and tsunami devastated north-eastern Japan. Economists predict Japan will report tomorrow a decline in its core consumer prices, supporting newly-installed Prime Minister Shinzo Abe’s case for “bold� monetary policy to spur the economy. U.S. lawmakers return to Washington today for budget negotiations aimed at avoiding more than $600 billion in tax gains and spending cuts scheduled to take effect Jan. 1. Italy plans to sell as much as 8.5 billion euros ($11.3 billion) of six-month bills today. “The message from Japan is clear,� said Stan Shamu, a markets strategist at IG Markets Ltd. in Melbourne. “The incoming government will do everything in its power to weaken the yen and stimulate the economy.� The MSCI Asia Pacific Index rose 0.5 percent, led by gains in Japanese exporters and financial companies. The gauge has risen 13 percent this year. Clariant, BMW South Korea’s Kospi Index added 0.3 percent as a central bank report showed manufacturers’ confidence rebounded from a three-year low. Hong Kong’s Hang Seng Index rose 0.4 percent, led by shares of Chinese companies, after a two-day holiday. Chinese industrial companies’ profits rose 23 percent from a year earlier in November, surpassing gains in the previous month, the government reported today. Clariant AG, a Swiss chemical company, jumped 5.7 percent after selling units for 502 million Swiss francs ($550 million). Bayerische Motoren Werke AG climbed 0.5 percent after estimating this year’s profit has surpassed that for all of 2011. The yen touched 85.87 per dollar. The currency has tumbled 14 percent this year, the biggest drop among the 10 developed- market currencies tracked by Bloomberg Correlation-Weighted Indexes. Japan’s consumer prices excluding fresh food fell 0.1 percent last month from a year earlier, according to the median estimate in a Bloomberg survey. That would be the sixth decline in seven months and compares with the Bank of Japan (8301)’s target of 1 percent inflation. ‘Bold’ Policy The central bank expanded its asset-purchase fund last week to 76 trillion yen ($886 billion) from 66 trillion yen, the third increase in four months, and Abe said yesterday that “bold� monetary policy is one of the three pillars of his economic measures. “The birth of the Abe administration is spurring expectations in markets that deflation will end,� said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “Markets are anticipating that the government will clarify its willingness to bring the yen down.� Further depreciation of the yen versus the dollar is one of the surest bets going into the new year, according to John Taylor, founder and chairman of New York-based currency hedge fund FX Concepts LLC. The yen will weaken to 90 per dollar before a resumption in risk aversion prompts investors to return to traditional refuge currencies, he said. Delaying Default Treasuries declined, pushing the 10-year yield up one basis point to 1.77 percent, before a report today that may add to evidence of a recovery in the U.S. housing market. Economists predict purchases of new homes quickened to a 380,000 annual pace in November, based on the median estimate in a Bloomberg survey. That would be the most since April 2010. Treasury Secretary Timothy F. Geithner said yesterday the U.S. government will hit its statutory debt ceiling on Dec. 31 and he will take “extraordinary measures� to postpone a U.S. default for about two months, allowing more time for lawmakers to agree a deficit-reduction deal. Copper rose to $7,939.75 a metric ton, from $7,810, while zinc gained 1.3 percent and aluminum added 1.4 percent. Rubber in Tokyo rallied above the 300-yen per kilogram level for the first time since May because of the weakening Japanese currency. To contact Bloomberg News staff for this story: Chua Baizhen in Singapore at bchua14@bloomberg.net To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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