FXstreet.com (Barcelona) - The announcement from the new Finance Minister, Taro Aso, that Japan will buy bonds issued by the European Stability Mechanism (ESM) "is unlikely on its own to lead to further weakening in the yen" says Julian Jessop, Chief Global Economist at Capital Economics.

Mr. Jessop adds: "The purchases will be made using existing foreign currency reserves (perhaps even existing holdings of euros in core government debt), so there will be no direct effect on the Japanese currency..." this suggests, according to Julian, that "any impact would therefore have to be indirect, relying instead on Japan's purchases contributing to a general improvement in sentiment towards the euro-zone and a reduction in safe haven demand for the yen."

Looking ahead, "whether the euro-zone crisis eases further or flares up again, and hence how the yen responds, will continue to depend overwhelmingly on developments in Europe itself" the Economist concludes.

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