The yen may drop to 108 per dollar in the coming year as Japan’s main government pension fund invests more of the world’s largest pool of retirement savings abroad, former Ministry of Finance official Eisuke Sakakibara said.
Japanese Prime Minister Shinzo Abe’s plan to beat deflation with money printing by the central bank is bound to fail as the root causes are more structural, said Eisuke Sakakibara, a former Ministry of Finance official.
The biggest drop in Japanese shares since the 2011 earthquake erased $314 billion in market value, shaking bulls who pushed the Topix Index to five-year highs and highlighting their vulnerability to shocks at home and abroad.
The Japanese yen, the best performer among major currencies this year with a 7.9 percent gain against the dollar, may surge further as concern grows that U.S. efforts to boost economic growth will fail.
Japan Prime Minister Naoto Kan says he is ready to take “bold” action as the yen approaches its postwar high against the dollar. Traders say new records are inevitable even after this year’s 9.8 percent gain.
The Bank of Japan’s unprecedented monetary easing will fail in its goal of spurring 2 percent inflation, according to Takahiro Mitani, president of the fund that manages the world’s largest pool of pension savings.
Asian stocks sank, with the regional benchmark index headed for the biggest drop since September 2011, as Japanese shares plummeted after preliminary China manufacturing data unexpectedly signaled a contraction and the yen strengthened.