Are the days of a strong Japanese yen numbered?
cnbc.com -- Nov 17
Yet another change of leadership in Japan and the prospect of more aggressive monetary easing have sent the safe haven yen tumbling to a six-month low and currency strategists tell CNBC the days of a strong yen may finally be over.
The yen fell to 81.2 against then U.S. dollar in Asian trade on Friday, building on the previous day's slide, after Japanese Prime Minister Yoshihiko Noda said on Wednesday he would dissolve the lower house for a snap election next month.
Polls point to a defeat for his Democratic Party of Japan (DPJ) and this will pave the way for the opposition Liberal Democratic Party (LDP), which will press the Bank of Japan (BOJ) to embark on unlimited easing, analysts said.
"There is a very good chance that the LDP will win majority. A LDP win means easy monetary policy will become a way of life for Japan," said Kathy Lien, managing director of BK Asset Management in New York. "This is bearish for the yen."
The LDP head Shinzo Abe, who is likely to be the next prime minister, called for unlimited monetary easing to spur inflation after years of deflation. The current inflation target is 1 percent, but Abe wants to raise it to 3 percent.
This target means that the BOJ make have to adopt easing for years to come, Lien said.
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