|09-10-2014, 06:23 PM||#1|
Japan officials believe a weaker yen is in favor of economy
Japan`s decision makers still favor a weaker yen in support of the economy, especially after expectations for a contraction in the current fiscal year, which is going to be the first since 2009.
Koichi Hamada, an adviser to Prime Minister Shinzo Abe, said that a weak yen is in the favor of the world`s third largest economy. Despite that the yen`s 26% drop against the U.S. dollar in the past two years didn’t push exports forward; both the BOJ and the government signaled a green light to a further drop.
Moreover, the Japanese trade balance deficit widened in July to 828.1 billion yen from of 537.1 billion yen in June, worse the median estimates for 725.9 billion yen.
Further decline in yen`s value is normal to be seen since the U.S. Federal Reserve continues to withdraw stimulus from the financial system, while Japan`s central bank maintains it. The government is also planning to add new stimulus measures to realize the targeted inflation of 2%, after raising sales tax from 5% to 8%.
Nevertheless, Economy Minister Akira Amari said last week that a drop in exchange rate is giving more support to consumption, since it boosts asset prices and corporate profits. Amari`s deputy, Yasutoshi Nishimura, added that there is no doubt that the weakening yen is positive for the economy.
The yen dropped 3.4% in the past three weeks to reach a six-year low, which is adding more price pressures in Japan. Yen traded at 106.14 per dollar at 9:07 AM in Tokyo.
As for GDP growth, the final reading of Japan`s Gross Domestic Product (GDP) showed the economy shrank 1.8% in the second quarter of 2014 compared with a previous contraction by 1.7%, and the reading met analysts` estimates. On the yearly record, the GDP contracted 7.1% in the quarter ended June, following a contraction by 6.8%, below median estimates for 7.0% contraction.
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