Weaker Yen Spurs Higher Inflation Cost Worries

While the yen’s sharp drop over the past two days has driven the Nikkei to near seven-year highs, the currency’s quick decline is also spurring concerns over Japan’s economic outlook.

“The main worry if the yen continues to weaken is inflation,” said Edwin Merner, president at Atlantis Investment Research.

The U.S. dollar was fetching as much as 109.46 yen intraday Friday, marking a six-year low for the Japanese currency, before the pair retreated to trade around 109.13. Early Wednesday, the U.S. dollar was fetching around 107.14.

“The government would like some inflation, but their idea of inflation is higher demand,” he said. “If you have higher costs without a lot of increase in demand, that would not be good. That may spur people to buy less.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza