Yen Weak Following Japan's Decision to Delay Sales Tax Rise

 
   By Alexander Martin 
 

        The yen weakened against major currencies during Asian trading Wednesday as share prices firmed following Tuesday's decision by Prime Minister Shinzo Abe to put off an unpopular increase in the sales tax and call a snap election.
        The Bank of Japan also decided to maintain its policy Wednesday after it surprised markets last month when it fired a fresh round of stimulus. The BOJ maintained the view that a moderate recovery trend has taken hold, suggesting that the downturn sparked by a tax increase earlier in the year will be short-lived.
        "Focus ahead will be BOJ Gov. Haruhiko Kuroda's news conference. If he makes remarks critical of the domestic political scene, it could indicate the government and the BOJ is out of step and lead to some buying back of the yen," said Junichi Ishikawa, market analyst at IG Securities in Tokyo.
        As of 0450 GMT, the dollar was at Y117.37, its highest level since October 2007, from Y116.85 late New York trading Tuesday. The euro was up at Y146.95 from Y146.47.
        On Tuesday Mr. Abe called a snap election for December and postponed a sales-tax increase after third-quarter growth figures showed Japan's economy had slipped back into a recession, weighed by an earlier sales tax increase in April that hurt consumption.
        Kengo Suzuki, chief forex strategist at Mizuho Securities said risk sentiment received a boost from a stronger-than-expected German ZEW survey of economic sentiment for November which led to rise in Europeans and U.S. stock markets overnight. The Nikkei also started the trading day up, although it trimmed its gains by mid-day.
        "Japan-factors like the snap election combined with improved risk sentiment from European indicators are taking turns pushing up the dollar/yen," he said, adding that the pair's upward bias appeared to remain firm.
        Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ said expectations of a weaker yen among investors were extremely high, and the currency was being oversold. "The pair could see it rise to Y118 in the short term," he said.
        Looking ahead, focus will also be on the release of minutes from the most recent Federal Open Market Committee policy meeting. Investors are looking for details on the monetary policy committee's outlook on the health of the U.S. economy and the Fed's intentions for interest rates.
        The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.23% at 80.18.
        Write to Alexander Martin at alexander.martin@wsj.com
        (END) Dow Jones Newswires

        November 19, 2014 00:02 ET (05:02 GMT)

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