Japanese yen hits 27-month low against US dollar
- 27 December 2012
- From the section Business
The Japanese yen has dipped to a 27-month low against the US dollar amid speculation that policymakers will take steps to weaken the currency.
It was trading close to 85.84 yen against the US dollar in early Asian trade, the lowest since September 2010.
Japan's new Prime Minister Shinzo Abe has promised steps to weaken the yen to help revive Japan's sluggish economy.
He has even suggested that Japan's central bank should print "unlimited yen" to help stoke inflation.
Mr Abe has also called upon the central bank to boost its stimulus measures and undertake aggressive monetary easing to spur economic growth.
That includes setting an inflation target of 2% - double that of the Bank of Japan's (BOJ) current target.
Analysts said that with Mr Abe's Liberal Democratic Party and its coalition partner having a two-thirds majority in the lower house, it was highly likely that Mr Abe will be to implement the measures that he had promised during his election campaign.
"There appears to be widespread agreement within the new government and its political alliances on the path to take," advisory firm Brown Brothers Harriman wrote in a note to clients.
"The majority seems to be willing to back Abe's call for 'bold monetary easing' and a 2% inflation target for the BOJ."
Many analysts have said that such aggressive measures were likely to weaken the yen.
Boost for exporters
The Japanese currency has fallen almost 7% against the US dollar since mid-November, after the former government agreed to hold snap elections.
It has also dipped against the euro and was trading at 113.60 yen against the single currency in Asian trade on Thursday - the lowest level since July 2011.
A weak yen bodes well for the Japanese exporters as it not only makes their goods more affordable to foreign buyers but also helps boost their profits when they repatriate their foreign earnings back home.
This is key for Japan's overall economy, as it relies heavily on its export sector for growth.
The prospects of a weak yen, coupled with further stimulus boost, has also had a positive impact on the stock market.
Japan's Nikkei 225 index has risen almost 20% in the past six weeks, with shares of major exporters leading the gains.