Yen weakens as Bank of Japan eases monetary policy to fight deflation


AFP

TOKYO–The Japanese yen weakened against major currencies in Asian trade on Tuesday afternoon following the Bank of Japan’s (BOJ) surprise decision to further ease monetary policy. The unit softened to 102.55 against the euro, compared with 102.34 late Monday in New York, while it also weakened to 77.91 against the dollar, from 77.58. The central bank on Tuesday increased its asset purchase program by 10 trillion yen (US$130 billion) to about 65 trillion yen, as it looks to put an end to the deflation that has wracked the economy for years. Additional easing by a central bank increases the supply of money in the economy, weakening the currency. The bank’s statement “gives us the impression that the BOJ has strengthened its pledge to keep monetary policy easy for the time being,” Mitsuru Sahara, a senior trader at Bank of Tokyo-Mitsubishi UFJ, told Dow Jones Newswires.

“I expect overseas investors to show a bigger reaction than Japanese investors. So the dollar may rise against the yen further in European and U.S. trading hours,” Sahara added. The euro was under pressure against major currencies after Moody’s cut the debt ratings and outlooks of several European countries. The agency downgraded Italy, Spain and Portugal and put France, Britain and Austria on warning, saying they were increasingly vulnerable to the eurozone crisis. Casting doubt over whether Europe’s leaders were doing enough to reverse the downslide of the region’s economy and financial sector, Moody’s also cut its ratings for Slovenia, Slovakia and Malta.