BLBG:Yen Falls 2nd Day as Abe Urges BOJ on Inflation Target
The yen weakened for a second day after a draft document obtained by Bloomberg News said Japan’s government strongly expects the nation’s central bank to conduct bold monetary easing under a clear price target.
Japan’s currency approached a 2 1/2-year low against the dollar after Bank of Japan (8301) Governor Masaaki Shirakawa said yesterday the BOJ was in close cooperation with the government, raising speculation policy makers will boost stimulus that tends to weaken the yen when they meet Jan. 21-22. The euro snapped a two-day decline versus the dollar before the European Central Bank decides on interest rates today. Australia’s dollar gained after China’s exports and imports grew more than estimated.
“Expectations are growing that the BOJ will do something and that is weakening the yen,” said Arne Rasmussen, the head of currency research at Danske Bank A/S (DANSKE) in Copenhagen. “They may add stimulus at the next meeting.”
The Japanese currency weakened 0.3 percent to 88.18 per dollar as of 9:06 a.m. London time, after dropping 1 percent yesterday. It depreciated to 88.41 on Jan. 4, the weakest level since July 2010. The yen lost 0.3 percent to 115.20 per euro. The 17-nation currency was little changed at $1.3065, after dropping 0.4 percent in the past two days.
The yen will weaken to 90 per dollar within three months, and may fall more rapidly should the BOJ take action at its meeting, Rasmussen said.
Special Account
Japan is considering using a special account in its foreign-exchange fund to stabilize the yen, according to the draft proposals obtained by Bloomberg News. The draft didn’t contain further details of the measures.
Prime Minister Shinzo Abe yesterday talked with Shirakawa at a meeting of Japan’s Council on Economic and Fiscal Policy, which was revived following its abolition by the previous government. Abe said the BOJ should aim for 2 percent inflation, double the current price goal which was introduced in February last year.
“The long-term downward trend in the yen hasn’t changed,” said Noriaki Murao, managing director of the marketing group in New York at Bank of Tokyo-Mitsubishi UFJ Ltd. “The BOJ may have no choice but to agree to the 2 percent inflation target, and it’s possible they may roll out additional quantitative easing,” he said, referring to central bank asset purchases.
The yen has lost 7.6 percent in the past month, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 0.3 percent and the euro advanced 0.8 percent in the same period.
ECB Decision
ECB policy makers will keep the main refinancing rate at a record-low 0.75 percent today, according to 50 of 55 analysts in a Bloomberg News survey. The remaining five predict a cut to 0.5 percent.
The central bank will announce the decision at 1:45 p.m. in Frankfurt, and President Mario Draghi will hold a news conference to explain the decision 45 minutes later.
Europe’s shared currency dropped 0.8 percent against the dollar after the ECB’s last decision on Dec. 6 when Draghi told reporters that policy makers had a “wide discussion” on rates and said economic weakness will persist.
Australia’s dollar advanced to the strongest since 2008 versus the yen and rose to the highest in more than three weeks versus its U.S. counterpart after data showed imports rose to a record in China, the nation’s biggest overseas market.
Shipments from China grew 14.1 percent in December from a year earlier, while imports increased 6 percent, the customs administration said today in Beijing. Economists surveyed by Bloomberg expected increases of 5 percent and 3.5 percent respectively.
The so-called Aussie rose to $1.0568, the most since Dec. 17, before trading 0.4 percent stronger at $1.0565. It gained as much as 1 percent to 93.28 yen, the highest since August 2008.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
