Japanese Minister Says Gradual Yen Slide Good For Economy

The yen is likely to weaken further due to differences of monetary policies in the U.S. and Japan, but further slips wouldn’t be bad for the economy as long as the pace is gradual, a senior Japanese government official said Wednesday.

“The exchange rate will be decided against a backdrop where the Bank of Japan is continuing easing while the U.S. is moving towards an exit from monetary easing,” vice economy minister Yasutoshi Nishimura told The Wall Street Journal in an interview. “A gradual weakening in the yen, without any sudden changes, is good for Japan.”

Mr. Nishimura’s comments come as some lawmakers, and even Prime Minister Shinzo Abe, have expressed caution in recent weeks about a weakening of the yen against other currencies.

A depreciation of the yen against the dollar since Mr. Abe took power in late 2012 has helped boost corporate profits and buoyed consumer price rises as the government tries to end 15 years of deflation. Yet some Japanese firms have complained that too much yen weakness makes imported items such as fuel too expensive. Panasonic Corp. chief Kazuhiro Tsuga, for example, recently said the dollar hitting Y120 would be “too much.”

Mr. Nishimura said the government should also proceed cautiously when deciding whether to raise the national sales tax to 10% from 8% in October 2015. The government raised the levy to 8% from 5% in April, causing a sharp pullback in demand and adding to calls from ruling party lawmakers to reconsider the timing of a second increase.

On Wednesday morning, over 40 ruling Liberal Democratic Party lawmakers convened for a study session to discuss the possibility of delaying the timing of the tax increase.

via WSJ

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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