Yen Falls As Abenomics Escapes Criticism At G-20

TOKYO (Nikkei)--The yen weakened in Tokyo on Monday as a sense of relief permeated the market following a Group of 20 meeting at which policymakers declined to single out Japan over currency devaluation.

Seeing that the G-20 statement did not directly attack Prime Minister Shinzo Abe's economic policy, investors stepped up yen-selling, driving the dollar above 94 yen for the first time in four trading days.

Abe's remark to the upper house Budget Committee on Monday that buying of foreign bonds by the Bank of Japan may be an option as part of monetary easing also fueled yen-selling.

But the currency's fall on Monday simply took it back to the level before the Group of Seven nations issued a joint statement last Tuesday. Market players appear to be cautious about pushing the yen too low too fast, since the G-20 statement simply suggested that the international community tolerates a weakening of a currency as a side effect of monetary policy. Tensions could quickly flare up over perceived attempts to devalue home currencies.

The market reacted to Abe's comment on the BOJ's foreign-bond purchases on Monday, but many analysts believe such a measure will be difficult to implement, since it will likely draw the ire of the international community.

The stock market reaped a strong gain Monday, with the Nikkei Stock Average climbing by more than 270 points from Friday's closing at one point on expectations that a weaker yen will boost exporters' earnings. With more monetary easing anticipated, bank and real estate stocks also rose.

But stocks, too, halted their advance after returning to the level before the G-7 statement, as investors are divided over how fast shares will climb from here on out.

"Investors will likely continue chasing stocks higher, but they will do so by confirming actual earnings improvements," said Masayuki Kubota, senior fund manager at Daiwa SB Investments Ltd.

(The Nikkei, Feb. 19 morning edition)

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