ID :
127059
Thu, 06/10/2010 - 07:47
Auther :
Shortlink :
https://www.oananews.org//node/127059
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FOCUS: Yen may rise further amid Kan`s efforts to restore fiscal health
TOKYO, June 9 Kyodo -
With the new Cabinet of Prime Minister Naoto Kan expected to make efforts to
tackle Japan's ballooning government deficit to restore fiscal health, the yen
could gain further ground against major currencies while hurting Japanese
stocks.
Market participants will be keeping a close eye on Kan's push for tighter
fiscal discipline and the new government's growth strategies for
export-oriented Japan amid ongoing concern about Europe's debt problems,
looking for clues about the future direction of currency and stock markets,
analysts said.
In his first news conference since assuming the premiership, Kan expressed his
readiness to address the nation's deficit-ridden finances, while suggesting the
tax system should be reviewed, including a possible hike in the current
5-percent consumption tax rate. ''Rebuilding the national finances is a
prerequisite for Japan's economic growth,'' Kan said, describing it as ''the
biggest challenge'' facing his government.
New Finance Minister Yoshihiko Noda echoed the view, telling a separate news
conference that he will make ''utmost efforts'' to keep government bond
issuance in the initial budget for fiscal 2011 below 44.3 trillion yen, the
level planned in the initial budget for the current fiscal year.
''The (stock) market has yet to make a judgment,'' said Yumi Nishimura, deputy
general manager at Daiwa Securities Capital Markets Co.
''As concern about Europe has been swirling, Japan hasn't been in the
spotlight. But in terms of its fiscal deficit, Japan could be a potential
source of concern...so attention is focused on (a possible hike in) the
consumption tax,'' Nishimura said.
Kan's moves toward tighter fiscal discipline will likely be welcomed by
investors, but analysts said it will be necessary to examine the details of the
government's policy further to assess the scale of the impact on the financial
markets.
Daisuke Uno, chief strategist of the Treasury Marketing Department at Sumitomo
Mitsui Banking Corp., said the new government's stance on restoring fiscal
health could further lift the yen, which has already strengthened against the
euro and the U.S. dollar amid eurozone sovereign debt concerns.
''Working toward rebuilding finances would be an advantage when compared to
other nations,'' especially at a time when credit and fiscal issues are the
biggest theme in the market, he said.
Uno added it was also likely to have a positive impact on Japanese stocks,
underpinning their downside even if equities in other countries decline.
Amid worries about eurozone debt, the euro briefly fell to an
eight-and-a-half-year low around the 108 yen line and the dollar remained
relatively weak around the 90-92 yen range, as the yen is often considered
safer than other currencies, given that Japan remains a creditor nation, unlike
indebted countries such as Greece.
The firm yen has discouraged investment in Japanese stocks, sending the key
Nikkei stock index to a six-month closing low of 9,439.13 on Wednesday.
The yen, however, could come under selling pressure if the government urges the
Bank of Japan to further ease its monetary stance, with Yuji Kameoka, chief
foreign exchange strategist at the Daiwa Institute of Research, saying, ''The
yen could come under pressure from monetary policy when it faces an upward push
amid financial instability.''
But such a move would have limited effect and is unlikely to set a clear
direction for the market, Kameoka said, adding that currency moves are more
influenced by economic trends overseas.
''Japan-related factors alone will not provide a major incentive contributing
to either the weakening or strengthening of the yen,'' he said.
The yen weakened last week mainly on selling by overseas participants who
believed that Kan, as successor of former Prime Minister Yukio Hatoyama, would
seek a weak yen.
As finance minister, Kan surprised markets in January by saying it would be
better if the yen weakened a bit more and most Japan's businesses saw the
dollar hovering around 95 yen as desirable.
But analysts believe such yen selling has already run its course and are
monitoring his remarks as prime minister.
==Kyodo
With the new Cabinet of Prime Minister Naoto Kan expected to make efforts to
tackle Japan's ballooning government deficit to restore fiscal health, the yen
could gain further ground against major currencies while hurting Japanese
stocks.
Market participants will be keeping a close eye on Kan's push for tighter
fiscal discipline and the new government's growth strategies for
export-oriented Japan amid ongoing concern about Europe's debt problems,
looking for clues about the future direction of currency and stock markets,
analysts said.
In his first news conference since assuming the premiership, Kan expressed his
readiness to address the nation's deficit-ridden finances, while suggesting the
tax system should be reviewed, including a possible hike in the current
5-percent consumption tax rate. ''Rebuilding the national finances is a
prerequisite for Japan's economic growth,'' Kan said, describing it as ''the
biggest challenge'' facing his government.
New Finance Minister Yoshihiko Noda echoed the view, telling a separate news
conference that he will make ''utmost efforts'' to keep government bond
issuance in the initial budget for fiscal 2011 below 44.3 trillion yen, the
level planned in the initial budget for the current fiscal year.
''The (stock) market has yet to make a judgment,'' said Yumi Nishimura, deputy
general manager at Daiwa Securities Capital Markets Co.
''As concern about Europe has been swirling, Japan hasn't been in the
spotlight. But in terms of its fiscal deficit, Japan could be a potential
source of concern...so attention is focused on (a possible hike in) the
consumption tax,'' Nishimura said.
Kan's moves toward tighter fiscal discipline will likely be welcomed by
investors, but analysts said it will be necessary to examine the details of the
government's policy further to assess the scale of the impact on the financial
markets.
Daisuke Uno, chief strategist of the Treasury Marketing Department at Sumitomo
Mitsui Banking Corp., said the new government's stance on restoring fiscal
health could further lift the yen, which has already strengthened against the
euro and the U.S. dollar amid eurozone sovereign debt concerns.
''Working toward rebuilding finances would be an advantage when compared to
other nations,'' especially at a time when credit and fiscal issues are the
biggest theme in the market, he said.
Uno added it was also likely to have a positive impact on Japanese stocks,
underpinning their downside even if equities in other countries decline.
Amid worries about eurozone debt, the euro briefly fell to an
eight-and-a-half-year low around the 108 yen line and the dollar remained
relatively weak around the 90-92 yen range, as the yen is often considered
safer than other currencies, given that Japan remains a creditor nation, unlike
indebted countries such as Greece.
The firm yen has discouraged investment in Japanese stocks, sending the key
Nikkei stock index to a six-month closing low of 9,439.13 on Wednesday.
The yen, however, could come under selling pressure if the government urges the
Bank of Japan to further ease its monetary stance, with Yuji Kameoka, chief
foreign exchange strategist at the Daiwa Institute of Research, saying, ''The
yen could come under pressure from monetary policy when it faces an upward push
amid financial instability.''
But such a move would have limited effect and is unlikely to set a clear
direction for the market, Kameoka said, adding that currency moves are more
influenced by economic trends overseas.
''Japan-related factors alone will not provide a major incentive contributing
to either the weakening or strengthening of the yen,'' he said.
The yen weakened last week mainly on selling by overseas participants who
believed that Kan, as successor of former Prime Minister Yukio Hatoyama, would
seek a weak yen.
As finance minister, Kan surprised markets in January by saying it would be
better if the yen weakened a bit more and most Japan's businesses saw the
dollar hovering around 95 yen as desirable.
But analysts believe such yen selling has already run its course and are
monitoring his remarks as prime minister.
==Kyodo
