As the runner up for the Finance Minister position in Japan, Hirohisa Fujii was already making waves with his statement about the MoF not intervining in behalf of the yen. That statement boosted the yen 0.9% as he is now the official Minister of Finance. Reuters published today a Q&A with various market participants to survey how they gauge the new ruling party policy.
The following question from the Reuters article sums up how the market feels about the incoming party:
WHAT DOES THE MARKET THINK THE NEW RULING PARTY WILL DO?
Many expect it to stick to the outgoing administration’s approach, which is to follow the G7 rich nations’ stance.
The G7 says excess volatility and disorderly moves have adverse implications for stability and it monitors markets closely and cooperates as appropriate. In effect, Japan has not gone beyond firing verbal warning shots since 2004.
Domestically, analysts say now isn’t the time to call for a stronger exchange rate with exports leading the economy out of recession, and longer term the Democrats are expected to be pragmatic as they have support from groups such as some labour unions who have an interest in a weaker yen.
“In the past, many DPJ lawmakers favoured a stronger yen, and said buying the dollar too much would be risky. But as the chance of taking power has become real, they have become grown-up,” said Mitsuru Saito, chief economist at Tokai Tokyo Securities.“I think the perception that they would like to see a stronger yen is fading.”
But being more pragmatic does not mean analysts expect the DPJ would intervene if the yen does strengthen, except to smooth volatility. Attempting to lower the exchange rate could cause friction with other countries when many are trying recover from the global crisis.
Click on this link for the complete article, a very worthwhile read as the speculation on what this new government could mean for the yen.
The FXEconostats graph shows the pricing of the currency in the past 2 years.
For more Forex Graphs and Japanese Economic Data check out FXEconostats
