Mar 28 2014

Rate Range Projection by Bank

 

Next week 101.50- 103.00
Next 3 months 100.00 - 105.00

 

The yen has weakened 16 percent since December 2012, when Prime Minister Shinzo Abe was elected on a pledge to flood markets with cheap money and end 15 years of crippling deflation by keeping the currency in check. Those losses have pushed up the costs of imports, increasing the current-account deficit to a record 1.59 trillion yen ($15.5 billion) in January.

 

 

Economy Minister Akira Amari warned on March 3 that a permanent current-account deficit would have an immediate impact on the credibility of government bonds. Speaking in parliament today, Abe said he will monitor the current-account balance with interest and that he will keep working toward maintaining trust in Japan's bonds.

 

While the yen is still regarded by investors as a safer bet than any of those developing currencies, the prospect of 33 years of current-account surpluses coming to an end may dent its appeal as a haven, according to Brown Brothers Harriman & Co.“As Japan’s current account continues to deteriorate, we may see bad currency weakness, just like the fragile five,” Masashi Murata, a Tokyo-based currency at strategist Brown Brothers Harriman, said in a March 26 phone interview. “Japan may enter the fragile list as early as this year.”

 

Japan’s encouragement of yen depreciation to boost the economy threatens to backfire by making the country dependent on foreign investors for funding. That’s the very same economic weakness that prompted Morgan Stanley to describe emerging-market currencies from South Africa’s rand to Turkey’s lira last year as the “fragile five.”