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Where is the yen heading for?

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In the middle of May the yen weakened past the 102-per-dollar mark, which has not happened since the autumn of 2008. The decline of the Japanese currency below the 100 mark has been expected by traders since the Central Bank in Tokyo announced in the early spring it aimеd at reaching two-percent inflation in the next 2 years.

Bank stimulus in Japan continues

Finance ministers and bankers have so far reaffirmed the commitment they took in February not to interfere in the Japanese stimulus policy. However, some analysts pointed out that this policy has been a frequent topic of discussion at high-level meetings. That is why recently Bank of Japan Governor Haruhiko Kuroda needed to reiterate that the increased monthly bond purchases aim just at ending long-term deflation in Japan.

This stimulus continues to bring the yen down, thus stimulating exports of Japanese companies. Companies like Toyota have recently reported doubling of incomes.

Fresh air for Japanese companies

The weak yen increases the competitiveness of Japanese products abroad. At the same time a weaker yen means even higher value of foreign income.

For Japanese car makers and other export oriented companies this is a breath of fresh air and a period of recovery after production was hurt by the devastating earthquake in 2011.

The positive effects on the Japanese economy have already started to have a positive effect on other economies too, as markets slowly start to exit stagnation. Inflation would encourage consumer spending, as well as more investments in the Japanese economy, analysts also say

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.

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