Yen dips as Yoshihiko Noda proposes snap elections

Japanese Yen v US Dollar

Last Updated at 06 Feb 2015, 08:40 ET JPY:USD one month chart
¥1 buys change %
0.0080
0.00
-0.55

Related Stories

Japan's yen has fallen after Prime Minister Yoshihiko Noda said he was set to dissolve parliament and hold a snap election.

It fell as low as 80.83 yen against the US dollar, a six-and-a-half month low.

There is no guarantee the government would win an election, and the opposition has called for aggressive monetary easing by the central bank.

Its leader, Shinzo Abe, has said the bank should print "unlimited yen" to help fight deflation.

Analysts said such a move would weaken the yen even further.

"It is very likely that the Liberal Democratic Party will take over the lower house again, and very clear that they will be pressuring the Bank of Japan to become more dovish," said Geoff Kendrick, a currency analyst at Nomura.

"We are expecting the dollar/yen to head up to around 82 yen by the end of the year."

Mr Noda is expected to formally announce the elections on Friday.

However, Mr Noda indicated that his call for a snap election was conditional on opposition support for a financing bill and voting reform.

Economic issues

Start Quote

If we take power, we'd like to do our utmost to beat deflation”

End Quote Shinzo Abe Liberal Democratic Party

Mr Noda's proposal for a snap election comes amid fears that Japan's economy may be heading back into a recession.

The economy contracted by 0.9% in the July to September quarter, from the previous three months. Most analysts have forecast that it may shrink further in the current quarter.

Japan's exports, one of the biggest drivers of growth, have been hurt by a slowdown in key markets such as the US and Europe.

Meanwhile, policymakers have found it increasingly tough to boost domestic consumption, as they continue to fight deflation or falling consumer prices, which tend to make customers put off their purchases in hope of a better deal down the road.

Mr Abe, the leader of the Liberal Democratic Party (LDP), has said that the bank of Japan (BOJ) needed to set an inflation target of 3% instead of its current 1% goal to help revive growth in the economy.

"If we take power, we'd like to do our utmost to beat deflation," Mr Abe said. "In doing so, monetary policy would be key."

He indicated that if elected, he would review the BOJ law that guarantees its independence from the government.

More on This Story

Related Stories

More Business stories

RSS

Features & Analysis

  • Cartoon of women chatting on the metroChat wagon

    The interesting things you hear in a women-only carriage


  • Replica of a cargo boxSpecial delivery

    The man who posted himself to the other side of the world


  • Music scoreFinal score Watch

    Goodbye to NYC's last classical sheet music shop


  • Former Secretary of State Hillary Rodham Clinton checks her Blackberry from a desk inside a C-17 military plane upon her departure from Malta, in the Mediterranean Sea, bound for Tripoli, Libya'Emailgate'

    Hillary gets a taste of scrutiny that lies ahead


Elsewhere on the BBC

  • Audi R8Best in show

    BBC Autos takes a look at 10 of the most eye-catching new cars at the 2015 Geneva motor show

Programmes

  • A cyborg cockroachClick Watch

    The cyborg cockroach – why has a computer been attached to this insect’s nervous system?

Try our new site and tell us what you think. Learn more
Take me there

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.