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Monday, 8th April 2013
In Business In Japan,

Japanese yen drops to lowest level since 2008 against US dollar

The latest round of the stimulus programme from the Bank of Japan has led to the yen falling to its lowest level against the US dollar for five years.

It dropped to 98.85 before recovering slightly, but the yen is expected to weaken further as the bank plans to buy more assets. One trillion will be spent on bonds which have maturities of between five and ten years, while 200 billion yen will go towards bonds with maturities exceeding ten years.

Investors have predicted that the 100-mark will be broken this week, and comes after the government said that it would double the supply of the currency.

Speaking to the BBC, Andrew Wilkinson, a chief strategist at Miller Tabak and Co, said that recent happenings have "shaken up many people's attitudes toward the Bank of Japan and the new government".

He added that it is becoming a "self-fulfilling" prophecy as the doubters have now jumped on the bandwagon.

"Getting to 100 yen against the dollar is just a matter of time …But US data has been a bit mixed and if we have more negative data, then the dollar-yen could come under pressure," Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking told the Guardian.

Analysts at Barclays Capital agreed that there is further weakening of the yen around the corner, given that the bank has made its intentions clear to commit to achieving a two per cent inflation target.

Investors from the company believe that the US dollar could rise to 103 yen over the next three months.

With the current pricing of the yen and dollar, Japanese manufacturers could stand to benefit, according to the business lobby group Keidanren. Hiromasa Yonekura, chairman, said consumer spending could also be boosted which will have a positive impact on the country's economy.

Written by Graham McPherson

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