Japanese Economy Minister Akira Amari said the nation faces risks from any excessive decline in the yen, highlighting limits on Prime Minister Shinzo Abe’s campaign to drive down the currency.
“If the yen excessively weakens, this would cause a spike in import prices,” Amari told reporters in Tokyo today. “It would be a benefit for exports, but would have harmful effects on people’s livelihoods.”
Fiscal stimulus and the prospect of more central-bank easing drove a decline of about 10 percent in the yen against the dollar in two months, aiding Japanese exporters as the nation struggles to climb out of recession. Any strengthening of the currency could limit the stock rally that prompted Bank of America Corp. to upgrade its forecast for equities to a 39 percent gain through year-end.
“Further depreciation of the yen is necessary to boost manufacturers’ profits and improve price competitiveness,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. and a former BOJ official.
The Japanese currency gained 0.6 percent to 89.95 per dollar as of 1:15 p.m. in Tokyo, heading for the first gain in five days. The Nikkei 225 Stock Average and the broader Topix Index pared increases, with both up 0.6 percent.
Amari said today that the currency is “correcting” to a level in line with economic fundamentals, while declining to comment on an appropriate value.
Bank of Japan Governor Masaaki Shirakawa said today that the nation’s economy remains weak ahead of a Jan 21-22 meeting where the central bank will decide whether to add to stimulus for the fourth time in five months.
“Exports and production are decreasing as the global slowdown continues,” Shirakawa said at a gathering of BOJ branch managers in Tokyo, adding that the bank will pursue “powerful monetary easing.”
Goldman Sachs Group Inc., Bank of America and Nomura Holdings Inc. are predicting Japanese stocks will extend their longest streak of gains in 23 years.
The Topix rose for nine straight weeks through Jan. 11, the longest stretch since December 1989, when it hit a record 2,886.5. Goldman Sachs boosted its estimate to 1,000 on Jan. 7 from 930, while Bank of America increased its 12-month estimate to 1,250 from 1,050, according to a Jan. 11 note.
Abe announced 10.3 trillion yen ($116 billion) in additional stimulus on Jan. 11 and is pressuring the Bank of Japan to double its inflation target to 2 percent after the third recession in five years. Goldman Sachs is buying shares of exporters, financial firms and utilities, Hiroyuki Ito, Tokyo-based head of equity investment at Goldman Sachs Asset Management Co., said last month.
International Monetary Fund official Zhu Min said today that Japan’s debt burden is becoming “more serious” as the government takes extra steps to stimulate growth in the world’s third-biggest economy. Zhu, a deputy managing director at the IMF, spoke in an interview in Hong Kong, where he’s attending the Asian Financial Forum.
The risk is that the nation’s debt burden, estimated by the IMF at 237 percent of gross domestic product last year, will lead to a surge in government bond yields.
Elsewhere in the Asia Pacific region today, New Zealand business confidence surged to the highest in five quarters, while the country’s home sales rose in December from a year earlier.
German economic growth probably slowed in 2012, according to a Bloomberg survey of economists ahead of data due today. Spain, Italy and Germany are scheduled to release inflation numbers for December.
U.S. retail sales probably rose in December as Americans wrapped up their holiday shopping and auto dealers closed out the best two months since 2008, economists surveyed by Bloomberg News predicted. A Federal Reserve report may show New-York area industrial activity stabilized in January, according to a separate survey.