Weaker yen could have mixed results for Asia currencies

By Crystal Hsu  /  Staff reporter

Fri, Apr 12, 2013 - Page 13

A stronger Japanese economy will benefit its Asian neighbors in the long run, but a weakening yen could have mixed effects for other Asian currencies in the short term, analysts said yesterday.

“The Japanese currency has been too strong for too long,” said Geoffrey Lunt, a Hong Kong-based fixed income specialist at HSBC Global Asset Management Ltd.

A value correction for the yen is a reasonable move for Japan as the Japanese government seeks to boost its economy and achieve an inflation target of 2 percent, Lunt said.

South Korea, which has benefited from a strong yen in recent years, is going through adjustments as the yen depreciation pans out, as are a number of other countries in Asia, Lunt said.

As of yesterday, the yen had declined 14 percent this year, while the South Korean won and the New Taiwan dollar had weakened 6 percent and 3 percent respectively, said a local currency analyst, who asked not to be named.

The analyst expects the local currency to trade at about NT$30 in the near term after closing at NT$29.98 versus the greenback in Taipei trading yesterday, saying that the central bank would not tolerate drastic volatility.

On the other hand, the Thai baht has picked up 3.3 percent so far this year on the back of fund inflows seeking to take advantage of Thailand’s close trade relations with Japan, Lunt said.

As Japan is one of the world’s largest economies, “a faster Japanese recovery will help drive the region and the world as a whole, the way China and the US do,” he said.

National Taiwan University economics professor Kenneth Lin (林向愷) said yesterday that a weaker yen would help reduce costs for Taiwanese importers, given their heavy dependence on Japanese raw materials and consumer goods.

However, it is too early to judge the overall impact of the depreciation of the yen because Japan could develop into more of a direct trading rival as a result, he said by telephone.