Yen's Fall Raises Hopes for Higher Stock Prices

The Daily Yomiuri (Toyko, Japan), May 28, 2015 | Go to article overview

Yen's Fall Raises Hopes for Higher Stock Prices


The trend of the yen falling against the U.S. dollar has been accelerating amid investors' expectations of the gap widening between Japanese and U.S. interest rates. The weakening of the yen is favorable for Japanese exporters, with market observers thinking that stock prices will remain high.

In the United States, expectations are growing stronger for the Federal Reserve to raise its policy interest rate at an early date this year, while the Bank of Japan is believed to be set to keep its monetary easing to help the country exit from deflation.

Expectations for U.S. rate hike

On Tuesday, the Japanese currency reached its weakest level in about seven years and 10 months as the greenback rose to nearly 123 yen on the foreign exchange market in Tokyo and then exceeded 123 yen in New York trading.

Many economists believe the gap between Japanese and U.S. interest rates will widen, and the yen will remain at lower levels with the dollar at higher levels -- as investors prefer the dollar to a low-interest yen as they think investment in the dollar is more profitable in the situation.

Federal Reserve Chair Janet Yellen said Friday, "If the [U.S.] economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target." Her remarks dispelled concerns over the prospects of the U.S. economy.

Contrary to the Fed heading for an interest rate hike, the Bank of Japan will keep its monetary easing policies for the time being as a way to exit deflation. At a Friday press conference, Bank of Japan Gov. Haruhiko Kuroda said it is "too early to discuss when the monetary easing should end. …

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