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| Yen dips below 100 threshold against US dollar | Yen dips below 100 threshold against US dollar |
| (about 2 hours later) | |
| The Japanese currency has dipped below the 100 yen mark against the US dollar for the first time since April 2009. | The Japanese currency has dipped below the 100 yen mark against the US dollar for the first time since April 2009. |
| It broke the threshold in New York on Thursday and was trading close to 100.8 yen to a US dollar in Asia on Friday. | It broke the threshold in New York on Thursday and was trading close to 100.8 yen to a US dollar in Asia on Friday. |
| The yen has dipped nearly 25% against the US dollar since November, after Japan unveiled a series of aggressive moves to spur growth in its economy. | The yen has dipped nearly 25% against the US dollar since November, after Japan unveiled a series of aggressive moves to spur growth in its economy. |
| The drop has helped boost profits of Japan's exporters and triggered a rally in Japan's stock market. | The drop has helped boost profits of Japan's exporters and triggered a rally in Japan's stock market. |
| The Japanese currency has come close to the 100 yen to a US dollar mark in recent days, but has been unable to breach that level. | The Japanese currency has come close to the 100 yen to a US dollar mark in recent days, but has been unable to breach that level. |
| Analysts said that on Thursday, strong data out of the US, which showed that first-time applications for unemployment insurance had fallen to the lowest level in more than five years, had helped the yen pass the mark. | |
| They said the data triggered hopes of a sustained recovery in the US economy, resulting in investors ditching safe-haven assets such as the yen in favour of the US dollar. | They said the data triggered hopes of a sustained recovery in the US economy, resulting in investors ditching safe-haven assets such as the yen in favour of the US dollar. |
| "A stampede out of safety and brightening US job prospects helped catapult the dollar over the key triple-digit threshold against the yen," said Joe Manimbo, senior market analyst at Western Union Business Solutions. | "A stampede out of safety and brightening US job prospects helped catapult the dollar over the key triple-digit threshold against the yen," said Joe Manimbo, senior market analyst at Western Union Business Solutions. |
| Aggressive measures | |
| Japanese policymakers have taken various measures as they look to try and revive the country's sluggish economy. | |
| A key policy initiative has been the Bank of Japan's decision to set a target of 2% rate of inflation. | |
| Unlike other economies in the region, Japan has been fighting deflation or falling prices for best part of the past two decades. That has hurt its attempts to spur domestic demand as consumers and businesses tend to put off purchases in hope of getting a cheaper deal later on. | |
| Earlier this year, the central bank announced that it would double the country's money supply and buy long term bonds to keep interest rates low. | |
| The idea was that with more money in the system, and at a cheap rate, more people would have cash to spend, driving up consumer demand and eventually consumer prices. | |
| All these measures have resulted in the yen weakening significantly over the past few months. | |
| A weak yen bodes well for Japanese exporters. It not only makes their goods cheaper to foreign buyers, which should help boost sales, but also lifts their profits when they repatriate their foreign earnings back home. | |
| The latter impact is already being felt by Japanese firms. | |
| Over the past few days, leading exporters such as Toyota and Sony have reported a jump in profits, courtesy of a weak currency. | |
| And with the yen expected to remain weak in the medium term, they have forecast a further jump in profits in the current financial year. | |
| Double edged sword? | |
| However, some analysts have warned of the risks associated with these aggressive measures and the yen's continued weakness. | |
| They say that if Japan's economy does not start showing signs of a recovery, and with interest rates in the country close to near zero, it may see a rise in "carry-trades". | |
| This happens when traders around the world borrow yen at very low interest rates and use it to buy currencies to invest in countries where interest rates are higher. | |
| Such trades have no impact on the real Japanese economy, but they result in the yen weakening further. | |
| That would not bode well for Japan, not least because the country has seen its fuel imports rise in recent times, after almost all its nuclear reactors were shut in the aftermath of the earthquake and tsunami in 2011. | |
| "Every decline in the yen against the US dollar means Japan is paying for more for its energy needs - its a steep rise in costs for everybody," said Sean Callow, senior currency strategist at Westpac. | |
| Mr Callow said that while a weak yen would help boost profits of exporters, the rise in energy costs "would offset some of those gains". | |
| At the same time, there are also concerns that if investors start to fear that the currency may keep on weakening, they may start to withdraw their saving and invest outside of Japan. | |
| That would not only put further pressure on the yen, but also see deposits in Japanese banks dip. | |
| Some analysts have warned that in a worst case scenario, it would see Japanese banks not having enough cash to buy government bonds - and a result the government may not be able to raise enough fresh money for its regular operations as well as to repay its debt. | |
| "In that scenario the government will either face bankruptcy or the Bank of Japan will have to keep printing more money, which will eventually result in hyperinflation," said Takeshi Fujimaki, of Fujimaki Japan. | |
| Hyperinflation is a situation where the price increases run out of control as the currency quickly loses its value. | |
| "This is good for the government as the value of its debt will shrink immensely, but it will miserable for the Japanese people as the value of their saving will erode," said Mr Fujimaki. |