Japanese Money-Pumping Spells Worthless Yen, Says Axel Merk

The yen will extend its world’s worst performance among major currencies this year as a reinforced Japanese government continues pumping cash into the economy, according to Axel Merk of Merk Investment LLC.

“Our price target for the yen is infinity, meaning we think the yen is going to be worthless down the road,” Merk, president and founder of the Mountain View, California-based company, said today in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee. “They’re going to try to pump as much money into the economy as possible and at some point they’re going to break their own neck with that.”

The Japanese currency has weakened against all of its 31 most-traded counterparts this year, falling 13.4 percent against the U.S. dollar and 9.5 percent against the South Korean won, as Prime Minister Shinzo Abe, strengthened by an upper-house election victory on July 21, and Bank of Japan Governor Haruhiko Kuroda pushed to stem deflation. A weak currency tends to help exporters. Japan’s Nikkei-225 (NKY) Stock Average has increased 42 percent in 2013.

The yen fell 0.8 percent to 100.19 per dollar at 12:31 p.m. New York time. The currency reached 103.74 on May 22, the weakest level since October 2008.

Abe’s three arrows of economic policy -- monetary and fiscal stimulus, and lower barriers for investment and hiring -- have boosted inflation expectations and diminished the value of Japan’s government bonds.

“The policy makers don’t understand the change dynamic,” Merk said. “The current-account surplus is gone in Japan, which means the deficit will start to matter.”

The yen will weaken to 109 per dollar by mid-2014, according to the median of 74 analyst estimates compiled by Bloomberg, a level unseen since before the collapse of Lehman Brothers Holdings Inc. in 2008.

To contact the reporter on this story: Jeff Marshall in New York at jmarshall75@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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