The Japanese yen is likely to depreciate further in the coming months, continuing the ongoing fall, in anticipation of more aggressive easing under a new central bank team after G-20 leaders indicated support for the country by avoiding criticism of the government's aggressive monetary easing plans, Capital Economics Chief Global Economist Julian Jessop said Monday.
Capital Economics, meanwhile, noted that since the yen has already fallen a long way it is likely to rebound in the second half of the year when the markets' high expectations are disappointed and the crisis in Europe flares up again.
According to the firm, the slide in the yen has been driven primarily by market expectations and speculation rather than by any actions actually yet taken by Japan.
Jessop said that the fall-out from an extended period of monetary expansion in the US and Japan will continue to ripple around the global financial system, and the G20 statement will allow the focus to move on from the hype about "currency wars".
The U.S. and Japan, who was been accused of loosening monetary policy in order to weaken their currencies and thus gaining a competitive advantage, actually intended to boost domestic demand, ultimately benefiting their trading partners too, the economist noted.
Referring to the interpretation of the G-20 decision to not to single out the yen as a "green light" to Japan to weaken its currency, Capital Economics pointed out that Japan certainly does not need international approval to stimulate its economy.
by RTT Staff Writer
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