The yen fell for a fourth day as the Bank of Japan (BoJ) said interest rate increases would be gradual, after policymakers raised borrowing costs for the second time in eight months.
Japan's currency declined after bank Governor Toshihiko Fukui and his policy board colleagues voted 8 to 1 to increase the overnight lending rate a quarter percentage point to 0.5 percent. Deputy Governor Kazumasa Iwata voted against the increase.
Japan's benchmark rate remains the lowest among major economies. It is still 4.75 percentage points lower than the US Federal Reserve's 5.25 percent and 3 percentage points lower than the European Central Bank's 3.50 percent. The lowest benchmark rate among major economies has encouraged investors to borrow in yen to invest in higher-yielding assets, known as the carry trade.
"There could be no rate hike in the coming six months," said Toru Umemoto, chief currency analyst at Barclays Capital in Tokyo.
"This will provide a safe environment for carry trades," Umemoto said.
The yen dropped to 120.34 against the US dollar at 7:08am in London, from 120.02 in New York on Tuesday. It slid to 158.17 per euro from 157.68.
The yen may fall to 125 per US dollar by the end of next month, he said.
On the Tokyo stock market, the benchmark Nikkei-225 index of leading shares rebounded temporarily, as relief set in that the next rate hike won't come for a while, but then finished down 25.91 points or 0.14 percent to 17,913.21. The US dollar, which had slipped on Japanese media reports of an imminent rate raise, also rebounded after the move.
But the broader TOPIX index, which includes all shares on the exchange's first section, rose 4.50 points, or 0.25 percent to 1,787.23 -- the index' highest close since April 7 last year.
The central bank will adjust policy "gradually in the light of economic activity and prices, while maintaining the accommodative financial conditions ensuing from very low interest rates for some time," it said in a statement.
Consumer prices excluding food will stay around zero percent, it said.
The bank said a decline in oil costs may cause core consumer prices, which include energy, to drop temporarily. Prices will rise in the medium to long term, it said. Core consumer prices rose 0.1 percent in December, slowing from 0.2 percent in November, as oil prices fell.
"The yen's bearish trend will continue" as long as rate increases are gradual, said Satoru Ogasawara, currency analyst and economist at Credit Suisse Group in Tokyo.
It may fall to 125 per US dollar over the next three months, he said.
Losses in the yen may accelerate should it break 120.50 per US dollar, where traders have orders to sell, said Michiyoshi Kato, a senior currency dealer in Tokyo at Mizuho Corporate Bank Ltd, a unit of Japan's second-largest lender by assets.
Traders sometimes place instructions to limit losses in case bets go the wrong way.
After the bank's decision, investors saw zero chance of another increase at the next meeting on March 19 to March 20, according to calculations by Credit Suisse Group based on the exchange of interest payments.
Japan's currency traded at 235.16 against the pound from 234.68 yesterday.
It stood at 94.79 versus the Australian dollar from 94.38. Against the New Zealand dollar, it was at 84.48 from 84.20.
Prime Minister Shinzo Abe, who faced elections for parliament's upper house in July, on Monday said that the BoJ should "take into consideration all factors, including risks."
"One rate hike won't stem the currency's decline," said Tetsuhisa Hayashi, chief currency trader in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd, a unit of Japan's largest lender by assets.
"The next rate hike will probably be after August, as we have the Upper House elections in July," Hayashi said.
A top government spokesman responded to the BoJ's decision to raise interest rates, calling the move "appropriate."
"As I understand it, discussions were held at the BoJ, and they reached an appropriate decision," said Chief Cabinet Secretary Yasuhisa Shiozaki, a former official at the BoJ.
Shiozaki said that the one dissenting vote by Iwata against the quarter-point rate rise to 0.5 percent was a reflection of healthy debate by the central bank's monetary policy board.
Polytronics Technology Corp (聚鼎科技) yesterday announced that it is buying Henkel AG’s thermal clad dielectric material (TCLAD) business division for US$26 million as the Taiwanese firm aims to improve its technology, product portfolio and revenue performance. Polytronics, headquartered in the Hsinchu Science Park (新竹科學園區), is a supplier of protection components and heat dissipation materials. The firm entered the metallic heat-dissipation substrate market in 2007 and developed a unique solventless production process. Its board of directors approved signing an agreement with Henkel to acquire the German chemical firm’s TCLAD division in the US. The purchase includes all assets and business interests, including equipment,
SIZE MATTERS: Medium-sized hotels that do not have the support of parent groups are more vulnerable and are forced to take action, a REPro Knight Frank researcher said About 50 hotels across Taiwan are seeking to exit the market as they succumb to the bleak business outlook amid international travel restrictions imposed to combat the COVID-19 pandemic. Yomi Hotel (優美飯店) on Minsheng E Road, Sec 1, in Taipei is seeking to transfer ownership with an asking price of NT$950 million (US$32.15 million) and a pledge for a lease contract that guarantees a 3 percent return. The budget hotel, with room rates that start from NT$1,400 per night, maintains normal operations, but has been struggling since March, when the government placed restrictions on inbound and outbound travel. Occupancy rates for hotels in
With the US dollar expected to weaken in the next 12 months due to near-zero interest rates, investors should consider purchasing US corporate bonds, Standard Chartered Bank Taiwan Ltd (渣打台灣銀行) said on Thursday. The bank said that the US Federal Reserve since last month has been buying bonds issued by US companies to curb default rates. The US dollar is forecast to be weaker against the pound, the euro and the yen, as well as the Canadian dollar, the Swedish krona and the Swiss franc, as the greenback lacks high investment returns after the Fed in March slashed the benchmark interest rate
‘SENSITIVE MARKETS’: The previously unannounced project would involve the company handing over control of data to a third party to sidestep privacy concerns Google has abandoned plans to offer a major new cloud service in China and other politically sensitive countries due in part to concerns over geopolitical tensions and the COVID-19 pandemic, two employees familiar with the matter said, revealing the challenges for US tech giants to secure business in those markets. In May, the search giant shut down the initiative, known as “Isolated Region” and which sought to address nations’ desires to control data within their borders, the employees said. The action was considered a “massive strategy shift,” said one of the employees, who added that Isolated Region had involved hundreds of employees