Yen Snaps Declines as Stocks Fall, Japanese Sold Foreign Debt

The yen snapped a two-day decline as Asian stocks slid, boosting the allure of the Japanese currency as a haven.

Demand for the the yen was also bolstered after Japanese data showed domestic investors sold foreign bonds for a fifth week, casting doubt on whether monetary stimulus will continue to weaken the currency.

“Stock declines are taking risk off the table, spurring buying of the yen,” said Kengo Suzuki, a currency strategist at Mizuho Securities Co. in Tokyo. “The key to further yen weakness is Japanese investors’ willingness to buy overseas assets.”

The yen traded little changed at 98.08 per dollar as of 7:11 a.m. in London after losing 1.4 percent in the prior two days. It was at 127.96 per euro from 127.87 yesterday, after earlier falling 0.5 percent. The euro added 0.1 percent to $1.3050.

The MSCI Asia Pacific Index of shares dropped 1.1 percent.

Bank of Japan (8301) Governor Haruhiko Kuroda unveiled a plan on April 4 to double the central bank’s holdings of government debt and stock funds in two years. Japan’s trade partners have expressed concern over the move, with the U.S. Treasury saying in its semi-annual currency report that Japan must “refrain from competitive devaluation.”

The yen plunged 19 percent over the past six months, the worst performance among 10 developed market currencies tracked by the Bloomberg Correlation Weighted Indexes. The dollar rose 2.6 percent and the euro gained 2.5 percent.

G-20 Meeting

Group of 20 finance ministers and central bankers meet for two days in Washington beginning today, before weekend talks at the International Monetary Fund and World Bank. A draft statement prepared for the group’s meeting maintains a February pledge to “move more rapidly toward more market-determined exchange rate systems and exchange-rate flexibility,” Bloomberg BNA reported.

IMF Chief Economist Olivier Blanchard said on April 16 that the yen’s depreciation is a “logical consequence of appropriate monetary policy” by the BOJ. At their last gathering in February, the G-20 signaled that Japan may stimulate its stagnant economy as long as policy makers refrain from publicly advocating a sliding yen.

Japan’s investors reduced their holdings of foreign debt by 331.9 billion yen ($3.4 billion) in the week ended April 12, according to data from the Asian nation’s Ministry of Finance. That followed a net sale of 1.14 trillion yen the prior week, the most in a year.

“This tremendous weakening in the yen has produced little more than profit taking by the Japanese themselves,” said Sean Callow, a senior foreign-exchange strategist in Sydney at Westpac Banking Corp. (WBC) “It gives the impression that money is not flowing out of Japan at all right now, so it’s at least cause for investors to have a bit of a rethink” about the effectiveness of BOJ policy.

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

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