Today the yen stalled in its seemingly relentless descent versus the dollar on comments from Japanese Economy Minister Akira Amari that the yen had corrected a lot and that further losses would have a negative effect on the Japanese economy. Speculation among currency traders is that Amari’s remarks were intended not to stop the drop in the yen but to moderate its speed.
The Japanese economy expanded by 0.9% in the first quarter for a 3.5% annual rate. This is the second straight quarter of expansion for the Japanese economy. But the Bank of Japan made less progress on its goal of ending deflation and reigniting inflation. Prices, according to the GDP deflator, fell by 1.2% in the quarter for a 14th straight quarter of deflation.
The yen has quietly staged another attack on the 100 yen to the dollar barrier. Once the barrier is crossed, I think the yen is likely to move quickly toward the 105 to the dollar mark that represents the next significant level in the Bank of Japan’s push to weaken the currency to stimulate the Japanese economy.
