Elections in Japan see the yen fall

Published: 19 Dec at 9 AM Tags: Euro, Dollar,

The elections in Japan have seen the yen drop dramatically against the dollar and the euro.

A landslide victory by the Liberal Democratic Party means Shinzo Abe will return to the position of prime minister. He has promised to introduce monetary easing in order to depress the value of the yen. He will also introduce a programme of fiscal spending in order to beat deflation.

By doing this Japan should be given an export advantage on the world’s markets. The election results saw the dollar hit 83.70 against the yen, a rise of 0.31 per cent, the highest the greenback has been for 20 months. The euro was also up to 110.29 yen, an increase of 0.36 per cent.

However, although the euro was also up against the dollar, an announcement by president of the European Central Bank, Mario Draghi, that growth across Europe would remain slow knocked the single currency off its high. The central bank warned that it is unlikely that Europe will see any significant growth until the end of 2013.

Analysts are currently watching the dollar to see how talks between the White House and Congress develop as the fiscal cliff approaches. The Obama administration is currently trying to push through $600 billion worth of spending cuts and tax hikes due to come into play at the beginning of next year.