Japan welcomes new government as yen slides

Published: 26 Dec at 9 AM Tags: Euro, Dollar,

As Japan prepares for a new government and Prime Minister today the yen has tumbled to its lowest level in nearly two years. Shinzo Abe is returning to power on the promise that he will boost the country’s economy by ramping up fiscal spending and driving down the value of the yen.

A weaker yen will make Japanese goods more attractive on the international markets. Activity on the financial markets has been slow because of Christmas with all G10 markets closing on Tuesday, except for Japan, and only Japan and the US opening on Wednesday.

Minutes from a policy meeting by the Bank of Japan last month reveal that board members are committed to dramatic changes if the country’s economy continues to weaken. The dollar hit 85.38 yen before settling at 85.27 yen, the highest it has been since April 2011.

Although unchanged against the dollar at $1.3182, the euro was up against the yen to 112.42. Because of the holidays the Australian dollar has also not moved much ending at $1.0357.

In America it is looking unlikely that an agreement over tax rises and spending cuts will be reached before the fiscal cliff at the end of the year. If the White House and Congress remain at an impasse, the US could find itself in recession next year.