Yen slides in Asia as new Japan government sworn in
AFPTOKYO--The yen's slide continued in Asia Thursday, plunging to a more than two-year low on the dollar after a new Japanese government took power with promises of big spending and central bank easing.
December 28, 2012, 12:09 am TWN
Against the dollar, the Japanese unit tumbled as low as 85.78, its weakest since September 2010, after hitting similar levels in New York on Wednesday.
It also lost ground against the euro at 113.41 yen from 113.19 yen in U.S. trading, while the European single currency was slightly down against the dollar at US$1.3223 from US$1.3230.
Dai Sato, senior vice president of foreign exchange at Mizuho Corporate Bank, told Dow Jones Newswires that it would “not be surprising” if the dollar climbed above the 86 yen level in Thursday's session.
The dollar hit a postwar low of 75.32 yen late last year as markets turned to the Japanese currency as a safe-haven from turmoil in debt-hit Europe and a slowing global economy.
The yen's recent weakness gave Tokyo's benchmark Nikkei 225 a lift Thursday with the benchmark stock index jumping to its highest levels since last year's quake-tsunami disaster.
Central bank easing — a key plank of the new government's plans — tends to weigh on the yen, while a weaker currency is good news for Japanese stocks as it makes exporters' products more competitive overseas.
Speculation was rife that the Bank of Japan (BOJ) would launch more easing measures as Japan's new premier Shinzo Abe and his Liberal Democratic Party swept to power on promises to fix the economy with big government spending and to pressure the central bank for more aggressive policy action.
“A strong economy is the source of Japan's national strength. Without a strong economy, Japan will not achieve fiscal reconstruction and have a future,” Abe told the late-night press conference Wednesday after parliament elected him as the country's leader.
Former Premier Taro Aso, Abe's pick as his deputy and finance minister, told finance officials Thursday that the BOJ had been “slow to react” on tackling the deflation that has plagued Japan's economy for years.
Markets were also keeping a close eye out for developments on averting the fiscal cliff package of tax hikes and spending cuts due to come into effect on Jan. 1 unless divided U.S. lawmakers strike a new budget deal.
There are widespread fears the package would drag the world's biggest economy into recession, dealing a major blow to global growth.