This morning the JPY continues its decline trading at 90.56. The greenback gained momentum in the North American session on Thursday after US unemployment numbers printed better than forecast. The US House of Representatives passing the vote to allow the US Treasury to continue to fund the government with an unlimited ceiling. This vote helped ease global fears over the uncertainty in the US. Yesterday, German Chancellor Angela Merkel attacked the Japanese government for manipulating the currency markets. Bank of Japan Governor Masaaki Shirakawa reaffirmed the bank’s commitment to maintain powerful monetary easing on Friday, but he warned that preventing credit bubbles was also among key roles for central banks across the world.
“Long-term interest rates will spike and erode the effect of monetary easing … if people perceive the BOJ as having shifted to a policy of recklessly buying government bonds, focusing narrow-mindedly on achieving 2 percent inflation,” Shirakawa told a news conference.
The BOJ announced on Tuesday it’s most determined effort yet to end years of economic stagnation, saying it would switch to an open-ended commitment to buying assets next year and double its inflation target to 2 percent.
Japan’s Finance Minister responded this morning to claims Tokyo was orchestrating a slide in the yen, a day after German leader Angela Merkel voiced concern over the new government’s exchange rate policy. The USD/JPY is trading at 90.56
“The criticism that (the government) is manipulating the currency rate is completely off the mark,” Taro Aso was quoted as saying in the online edition of the leading Nikkei business daily.
His comments were the latest in a simmering row over Japan’s currency, with critics saying Tokyo’s pressure on the central bank for aggressive policy action amounted to meddling that could spark a global currency war.
“I will admit I am not without some concern about Japan right now,” Merkel told top business and political leaders at the World Economic Forum in Davos on Thursday. The German leader added that “political influences or manipulations of the exchange rate” have become a hot topic within the Group of 20.
The yen hit record highs against the dollar in late 2011 — sitting around 75 to the greenback — and remained strong through much of last year, hammering Japanese exporters by making their products less competitive overseas. The EUR/JPY also continued to climb trading this morning at 121.06
But it has tumbled in recent months, since opposition leader Shinzo Abe promised before December’s election that he would urge the bank to be more aggressive in its battle to save the economy.
Abe swept to power in the poll and has since moved to bring BoJ policies into line with his new government’s position, at one point warning he would alter the law guaranteeing the bank’s independence it did not follow suit.