The yen weakened to ￥94 per US dollar for the first time since May 2010 on speculation Japan’s government would hasten the selection of a new central bank chief to take further steps to end deflation.
Japan’s currency added to Tuesday’s biggest drop versus the euro in more than a week after Bank of Japan (BOJ) Governor Masaaki Shirakawa said he would step down on March 19, almost three weeks before his term is due to end.
“The new BOJ governor is expected to be someone who will push easing hard,” said Masato Yanagiya, head of currency and money trading in New York at Sumitomo Mitsui Banking Corp. “The yen weakness trend is likely to remain.”
The yen touched ￥94.06 per US dollar, the lowest since May 5, 2010, before trading at ￥93.92 at 7:01am in London, down 0.3 percent from the close in New York. It fell 0.2 percent to ￥127.44 per euro, after dropping to ￥127.71, the weakest since April 2010. The common currency slid 0.1 percent to ＵS$1.3571.
Japanese Prime Minister Shinzo Abe will present his candidate for BOJ governor to opposition parties after a visit to the US this month, public broadcaster NHK reported yesterday, without saying where it got the information. Shirakawa’s exit coincides with the departure of two deputy governors.
The short-list to replace Shirakawa is probably composed of Asian Development Bank president Haruhiko Kuroda and former BOJ deputy governors Kazumasa Iwata and Toshiro Muto, Masaaki Kanno, chief economist at JPMorgan Securities Japan Co, who used to work at the central bank, wrote in a note last month.
Abe has repeatedly said he wants the BOJ to take responsibility for the 2 percent inflation target it agreed to set last month. His government has defined ending deflation as central to efforts to revive the world’s third-biggest economy.
The IMF supports the nation’s efforts to end deflation, a government official said yesterday. IMF Deputy Managing Director David Lipton told Japanese Economy Minister Akira Amari that Tokyo was going in right direction in trying to achieve the 2 percent inflation goal, a Cabinet official told reporters, asking not to be named because of government policy.
The yen tumbled 17 percent over the past three months, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 5.2 percent, and the dollar lost 1.2 percent during the same period.
In stock markets, Tokyo’s benchmark Nikkei 225 index yesterday soared to its highest close since September 2008, when the global financial crisis was rippling across global equity markets.
The Nikkei jumped 3.77 percent, or 416.83 points, to 11,463.75 on a spike in risk sentiment, as the yen plunged on surprise news that the head of the Bank of Japan would quit early.
The last time the index was higher was when it closed above 11,700 at the end of September, weeks after the collapse of Wall Street giant Lehman Brothers, which sparked a global panic and huge sell-off in stocks.