Forex Flash: Yen stabilizes as Japan attempts to downplay currency war – BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes that Yen has stabilised in the Asian trading session following renewed downward momentum late last week.
He sees that the sharp 17.0% decline in the BoJ's nominal trade-weighted yen index since late August 2011 is drawing building concern amongst international policy makers that the Japanese authorities are adopting beggar thy neighbour policies to boost economic growth.
He comments that the new government has clearly signalled that it desires a weaker yen and has continually verbally intervened since it came to power in an attempt to talk down the yen. However, the Japanese government appears to be now trying to calm building international concerns over their apparent yen devaluation policy ahead of the upcoming G20 finance minsters meeting in February.
Economy Minister Amari told the World Economic Forum that Japan is "absolutely not deviating from global standards" stating that "I don't comment on foreign exchange rate because it should be determined by the market. What we do is implement policies". He also told reporters that "many nations welcome and support Japan's new measures" to help exit prolonged deflation and revitalize the economy, although "misunderstandings held by a small group of people have been cleared up".
Hardman adds that recent developments highlight that the Japanese authorities would likely have drawn less international criticism if they have refrained from talking about the yen so directly and let changes in BoJ monetary policy expectations weaken the yen. A view expressed in an opinion piece in today's FT by Niall Ferguson titled "currency wars are best fought quietly".
He notes that as a result of new fiscal and monetary policy stimulus, the Japanese Cabinet Office announced overnight that it has raised its economic growth projection for FY2013/14 to 2.5% from 1.9%. However economic growth for the current fiscal year was revised lower to 1.0% from 2.2%. Given the upgrade to the economic growth outlook, the government's draft budget projects that in the coming fiscal year tax revenue (JPY43.1 trillion) will exceed cash raised from bond sales (JPY42.85 trillion) for the first time in four years. To help raise revenue the government proposes increasing the top income tax rate to 45% from 40%, and inheritance tax to 55% from 50%.
He sees that the sharp 17.0% decline in the BoJ's nominal trade-weighted yen index since late August 2011 is drawing building concern amongst international policy makers that the Japanese authorities are adopting beggar thy neighbour policies to boost economic growth.
He comments that the new government has clearly signalled that it desires a weaker yen and has continually verbally intervened since it came to power in an attempt to talk down the yen. However, the Japanese government appears to be now trying to calm building international concerns over their apparent yen devaluation policy ahead of the upcoming G20 finance minsters meeting in February.
Economy Minister Amari told the World Economic Forum that Japan is "absolutely not deviating from global standards" stating that "I don't comment on foreign exchange rate because it should be determined by the market. What we do is implement policies". He also told reporters that "many nations welcome and support Japan's new measures" to help exit prolonged deflation and revitalize the economy, although "misunderstandings held by a small group of people have been cleared up".
Hardman adds that recent developments highlight that the Japanese authorities would likely have drawn less international criticism if they have refrained from talking about the yen so directly and let changes in BoJ monetary policy expectations weaken the yen. A view expressed in an opinion piece in today's FT by Niall Ferguson titled "currency wars are best fought quietly".
He notes that as a result of new fiscal and monetary policy stimulus, the Japanese Cabinet Office announced overnight that it has raised its economic growth projection for FY2013/14 to 2.5% from 1.9%. However economic growth for the current fiscal year was revised lower to 1.0% from 2.2%. Given the upgrade to the economic growth outlook, the government's draft budget projects that in the coming fiscal year tax revenue (JPY43.1 trillion) will exceed cash raised from bond sales (JPY42.85 trillion) for the first time in four years. To help raise revenue the government proposes increasing the top income tax rate to 45% from 40%, and inheritance tax to 55% from 50%.
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