CurrencyShares Japanese Yen (NYSEArca: FXY) is one of the worst-performing currency ETFs in 2012 and has been moving straight down the past two weeks on speculation the Bank of Japan will eventually be forced to launch more easing measures to boost the flagging economy.
However, the Bank of Japan kept its monetary policy unchanged following a meeting this week. It announced stimulus measures in September and October. [Currency ETF Wars]
The central bank is standing its ground for now “in the face of calls from the country’s likely next prime minister to pursue ‘unlimited’ easing to revive an economy widely seen in recession,” Reuters reports. “The leader of the main opposition, Shinzo Abe, has put the central bank at the center of economic debate ahead of a December 16 national election that surveys show his party would win, signaling his government would put the bank under much greater pressure to ease policy.”
The Bank of Japan said it expects the economy to remain “relatively weak” amid “a high degree of uncertainty.”
Separately, data released Wednesday showed Japan is suffering its worst year for exports since the global slowdown in 2009, Bloomberg News reports.
“There’s no doubt that Japan’s economy is already in a recession,” said Kiichi Murashima, chief economist at Citigroup in Tokyo, in the article. “Political pressure for further monetary easing is building, and we expect the BOJ to take additional measures in January.”
The weaker yen has helped spur a rally the past week in iShares MSCI Japan (NYSEArca: EWJ), which has also seen trading volume surge.
“You really can’t look anywhere right now without reading about someone hating the yen,” reports Joe Weisenthal at Business Insider. “It’s really non-stop. Hating the yen — due to expected BOJ easing and a trade deficit — is the currency story of the moment.”
CurrencyShares Japanese Yen
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.