The yen plunged in Asian currency markets yesterday and Tokyo stocks closed 0.94 percent higher after Japan’s conservative opposition swept to victory in national polls, with promises from its leader to press for more central bank easing.
In early Tokyo trade the US dollar bought ￥84.30, up from ￥83.52 in New York on Friday and at its strongest level against the Japanese currency in more than a year and a half.
The euro also soared to multi-month highs at ￥111.10 from ￥109.94 in US trade.
But by late afternoon trade, the yen clawed back slightly, with the US dollar at ￥84.05 while the euro was at ￥110.58.
The European single currency also bought US$1.3154, compared with US$1.3161 in New York.
The benchmark Nikkei 225 index added 91.32 points to 9,828.88, while the broader Topix index of all first-section shares rose 0.85 percent, or 6.80 points, to 807.84.
On Sunday, voters dumped Japanese Prime Minister Yoshihiko Noda three years after his Democratic Party of Japan (DPJ) promised a change from more than half a century of almost unbroken rule by the Liberal Democratic Party (LDP).
Hawkish LDP head Shinzo Abe pledged to bolster Japan’s defenses in the face of a territorial spat with China while vowing to pressure the Bank of Japan (BoJ) into more aggressive policy easing measures to kickstart the economy.
He also offered to boost spending on infrastructure at a time when much of the tsunami-wrecked northeast remains a shell of its former self after last year’s disaster, which sparked the worst atomic crisis in a generation.
Abe’s central bank pledge has weighed on the yen in recent weeks as traders bet that an LDP victory would boost the likelihood of more easing from the central bank, and see the appointment of a like-minded Bank of Japan governor after current chief Masaaki Shirakawa’s term ends next year.
However, Abe’s stated goals may hit political resistance despite Sunday’s landslide, National Australia Bank said in a note.
“The upper house will ... still have a say in the appointment of new BoJ officials,” it said.
“This is of some significance, meaning that the LDP cannot automatically appoint its preferred choices for the posts of the bank’s governor and deputy governors [both of them], all of whose terms expire next March and April,” the note said.
However, speculation over the bank’s policy moves were reinforced on Friday after the bank’s own quarterly Tankan survey showed confidence among Japanese manufacturers hit a near three-year low in the final months of this year.
Those were the weakest Tankan results since the start of 2010.