Japanese officials have signaled their blessing of a weaker yen as polls show Prime Minister Shinzo Abe¡¯s coalition may expand its Lower House majority in this weekend¡¯s election.
Finance Minister Taro Aso said Tuesday that the yen¡¯s slide has helped improve the economy and increase jobs, while adding that officials are monitoring the currency.
Economy minister Akira Amari said a drop in energy prices will offset the impact from the yen¡¯s weakness.
The yen fell to a seven-year low of 121.85 per dollar Monday, before rallying somewhat in Tokyo trade on Tuesday.
Aso¡¯s comments mark a turnaround from last month, when he warned the yen was falling too fast. It was the strongest statement by a top policymaker since the Bank of Japan unexpectedly added to currency-depreciating quantitative easing on Oct. 31. Consumers have been squeezed by costlier imports, and corporate bankruptcies driven by a weak yen rose to a record in November.
¡°If Japanese officials support the current level as being good for the economy in a holistic sense, then the market will continue to push dollar-yen higher,¡± Robert Rennie, Westpac Banking Corp.¡¯s head of currency and commodity strategy in Sydney, said Tuesday. ¡°The other Abe policies have essentially been put to one side: It is the reform agenda, it is the BOJ, it is QE, and if that drives a weaker yen, so be it.¡±
Abe has framed Sunday¡¯s election as a referendum on his economic strategy of monetary easing, fiscal stimulus and structural reforms. Opinion polls published by five major newspapers last week showed that the coalition led by Abe¡¯s Liberal Democratic Party will probably keep its two-thirds majority in the Lower House, allowing it to override Upper House decisions.
Oil has slumped to a five-year low, easing the strain on households coping with a yen that is 37 percent undervalued compared with the dollar in terms of purchasing power, the most among developed-market currencies, data shows.
The drop in energy prices combined with a depreciating yen helped boost Japanese stocks to a seven-year high this week. Toyota Motor Corp. last month predicted record profit for a second year as a weaker yen raised the value of vehicles sold abroad.
¡°The government isn¡¯t going to try to talk down a weak yen when it¡¯s flowing into stock market gains right before the election,¡± said Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo. ¡°For now, just saying they¡¯re watching the exchange rate is enough.¡±
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.