Yen tumbles as Japan unveils big spending plan

PHOTO: Yen tumbles as Japan unveils big spending plan

TOKYO - The yen fell in Asian trade on Friday as Tokyo unveiled a huge spending plan and kept pressure on the central bank to take more easing steps to stimulate the moribund economy.

The dollar was at 88.82 yen in Tokyo midday trade against 88.64 yen in New York Thursday afternoon. Earlier Friday the greenback briefly rose to 89.34 yen, the highest level since June 2010.

The euro fetched 117.75 yen after rising past 118.00 yen for the first time since May 2011. The common currency was at 117.53 yen in New York Thursday afternoon.

Against the dollar the euro bought $1.3254 from $1.3261 in New York where the European common currency rose after European Central Bank chief Mario Draghi made upbeat remarks about the eurozone's economic outlook.

The yen remained weak and Tokyo stocks rose more than one per cent as Prime Minister Shinzo Abe unveiled a $226.5 billion (S$275.4 billion) stimulus package to breathe life into the world's third-largest economy.

"Trading has been led by expectations for policy steps," said Daisuke Karakama, market economist at Mizuho Corporate Bank.

"These expectations are materialising one by one... The government will likely to do whatever it takes until the upper house election and the decision over a consumption tax hike later in the year," he told Dow Jones Newswires.

Abe has also reiterated in recent interviews with Japanese media that he would press the central bank to make more efforts to pull the nation out of years of deflation, as it is set to hold a policy meeting on January 21-22.

The mass-circulation Yomiuri daily said the Bank of Japan would consider introducing an annual inflation target of two per cent as Abe wants and continuing monetary easing until they are certain to achieve the goal.

The yen was also weighed down as government data showed the nation had fallen into a deficit on the current account, the broadest measure of the nation's trade with the rest of the world.

Japan logged a bigger-than-expected 222.4 billion yen (S$3.05 billion) deficit in Nov on the current account as exports to Europe and China dropped, data from the finance ministry showed.