Current yen weakness is expected to continue into 2014, thanks in large part to Abenomics. With the BOJ continuing to add money to the economy, it’s not much of a surprise that the yen is likely to remain weak.
During 2013, the yen was one of the worst performers of the major currencies. Yen lost more than 20 percent of its value relative to the US dollar, and it is likely to lose close to 18 percent against commodity currencies. USD/JPY is approaching the 105 level, and there is speculation that the currency pair could hit 110 in 2014.
One of the big reasons that the yen has lost value is due to the plan of Prime Minister Shinzo Abe. He has a long-term friend in the current Bank of Japan head, and together they are implementing economic stimulus designed to keep the yen weak and boost exports. It’s one of the reasons that Japanese stocks have had a spectacular year.
The stimulus is likely to continue in 2014, due in large part to the fact that an increase in the consumption tax is coming. The higher taxes are expected to slow economic recovery, and that means that more stimulus might be needed.
At 23:52 GMT USD/JPY is up to 104.9020 from the open at 104.7375. EUR/JPY is up to 143.6470 from the open at 104.4310. GBP/JPY is up 172.1555 from the open at 171.9750.
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