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Forex pairs in this Article » USD/JPY (London) - The yen has steadied short-term losses against the dollar, after its biggest yearly decline in 34 years.

USD/JPY has climbed from JPY86.60 on 2 January, up 21.6 percent on the year-to-date.

USD/JPY is up 0.14 percent on today’s session on choppy trading to JPY104.9665.

Yen has been in year-long bearish trend against the dollar on diverging monetary policies.

The US Federal Reserve announced on 18 December that it would be tapering its asset purchase programme by USD10bn to USD75bn a month. It is anticipated that the Fed will continue to trim its stimulus measures in USD10bn increments, winding up the programme by December 2014.

In contrast, the Bank of Japan remains committed to its aggressive bond purchase programme of JPY7 trillion a month.

At its December meeting, the BoJ board and Governor Haruhiko Kuroda maintained their pledge to expand Japan’s monetary base by an annual 60 trillion to 70 trillion yen in a fight against deflationary pressures.

The falling yen strength will provide a major boost to policymakers and their drive towards a 2 percent inflation target with yen weakness importing inflation through rising domestic prices for imported goods.

The weak yen may hold through the first quarter of 2014, but will be put under pressure when Prime Minister Shinzo Abe’s planned sales tax increases kick in on April 1, the first increase since 1997.
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