Yen Weaker on Aggressive Easing Threat

The Japanese Yen’s broad downward fall continued during Friday’s trading session in Asia as the U.S. Dollar edged lower on market players’ speculation that the fiscal cliff problem won’t be resolved in time to avoid billions of dollars worth of spending cuts and tax increases. As reported at 11:32 a.m. (JST) in Tokyo, the USD/JPY pair was trading at 86.42 Japanese Yen, a rise of nearly 0.4% from late trade in New York and remains close to the 28-month peak of 86.64 Yen hit earlier on the EBS trading platform. Analysts expect the greenback to end the trading week well above the 200-week moving average of 84.95 Yen which signals to investors that further gains are likely ahead. One economic strategist in New York said that 90.00 Yen was not an unreasonable target to consider given that a solid policy change is in the making in Japan.

The new government of Japan has pledged that they would further depreciate the Yen in order to fight deflation. An advisor to the Prime Minister Shinzo Abe said yesterday that the central bank was going to be held more accountable for monetary policy objectives and further that it would be compelled to set a price target significantly higher than the current one.

The U.S. government, meanwhile, continues to be at loggerheads as to the way forward in the resolution of the impending fiscal cliff. Lawmakers are expected to cut short their holidays and return to Washington to be ready to vote on the deal, suggesting that there might still be an 11th hour resolution.