Yen Drops After Japan GDP Shrinks Most Since 2011 Quake

The yen weakened against most of its major counterparts after data today showed Japan’s economy contracted in the third quarter at the fastest pace since last year’s record earthquake.

The Japanese currency halted three days of advances versus the euro after Bank of Japan (8301) Governor Masaaki Shirakawa signaled the central bank remains distant from its 1 percent inflation target, fanning speculation that policy makers will expand stimulus. The euro rebounded from near a two-month low against the greenback after Greek Prime Minister Antonis Samaras secured support from a majority of lawmakers for the 2013 budget needed to unlock international bailout funds.

“We’re seeing a bit of yen selling against its crosses,” said Lee Wai Tuck, currency strategist at Forecast Pte in Singapore. “There is some concern that Japan may be falling into recession.”

The yen slid 0.2 percent to 101.26 per euro as of 6:51 a.m. in London from 101.05 at the close on Nov. 9, following a 1.9 percent gain over the previous three sessions. It was little changed at 79.51 per dollar. The euro added 0.2 percent to $1.2735, after touching $1.2690 last week, the lowest since Sept. 7.

In Japan, gross domestic product fell an annualized 3.5 percent in the three months through September, after a revised 0.3 percent gain the previous quarter, the Cabinet Office said in Tokyo today. The median of 23 estimates in a Bloomberg News survey was for a 3.4 percent drop.

Recession Again

The world’s third-largest economy will probably shrink at an annual pace of 0.4 percent this quarter, according to the median forecast of 24 economists surveyed by Bloomberg. That would be the third technical recession since 2008. Japanese recessions are officially defined by a government-charged panel that considers data beyond GDP figures.

Shirakawa said today that the nation’s economy is weakening, citing a strong currency. The BOJ increased its asset-purchase program by 11 trillion yen ($138.4 billion) to 66 trillion yen on Oct. 30, saying the central bank and the government will make “utmost” efforts to overcome deflation. Shirakawa and his board next gather on Nov. 19-20.

The yen has declined 5 percent this year, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has fallen 1.4 percent while the euro has weakened 3.3 percent.

Greece’s Samaras secured the vote on Greece’s 2013 budget with 167 votes in the 300-seat parliamentary chamber today, setting up the next tranche of an international bailout. The nation’s fiscal plan, which forecasts a deficit of 5.2 percent of GDP and a sixth year of contraction, is designed to regain the confidence of its euro-area and International Monetary Fund creditors.

Bailout Prospects

The vote was the second in five days after lawmakers approved an austerity bill on Nov. 8 containing economic reforms and 13.5 billion euros of austerity measures demanded by Greece’s creditors.

Euro-area finance ministers will meet at 5 p.m. in Brussels today. While ministers probably won’t approve 31.5 billion euros ($40 billion) in fresh loans to Greece, the maturing of 5 billion euros of Greek bills on Nov. 16 won’t lead to an “accidental default,” a European official said last week.

“People may be buying back the euro a bit on the news that Greece passed the budget,” said Kumiko Gervaise, an analyst at Gaitame.com Research Institute Ltd. in Tokyo. “But it doesn’t necessarily mean that we can expect a smooth decision on the aid.”

Futures traders increased their bets that the euro will decline against the dollar for a third week, figures from the Washington-based Commodity Futures Trading Commission show.

Net Shorts

The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 67,141 on Nov. 6, compared with net shorts of 58,204 a week earlier.

Australia’s dollar rose after a bigger-than-estimated trade surplus in China brightened prospects for commodity exports, and data today showed Australian home-loan approvals rose for a second month.

China’s customs administration said Nov. 10 the nation’s exports exceeded imports by $32 billion in October, compared to a $27.3 billion trade surplus estimated by economists surveyed by Bloomberg. China is Australia’s biggest trading partner.

In Australia, the number of loans granted to build or buy houses and apartments rose 0.9 percent in September from the previous month, when it grew by a revised 2.1 percent, the statistics bureau said in Sydney today.

The so-called Aussie dollar climbed 0.3 percent to $1.04218.

To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.