U.S. Markets closed

Japanese Yen ETF Falls to 2012 Low Before Election


CurrencyShares Japanese Yen (FXY) is threatening to fall to a new 52-week low as the country prepares for a key election this weekend. The currency ETF has been getting crushed on expectations the frontrunner for prime minister will compel the Bank of Japan to unleash further monetary easing to support the economy.

On Thursday, FXY traded as low as $117.29 a share, close to this year’s low of $117.13 set on March 21.

The favorite to become Japan’s next prime minister, former PM Shinzo Abe, has pledged to pressure the Bank of Japan to launch unlimited monetary easing to revive the economy. A weaker yen also helps the country’s exporters. [The Perfect ETF for Higher Japanese Stocks and a Weaker Yen]

“In an anticipation of this shift, the yen has been getting creamed,” reports Joe Weisenthal at Business Insider.

FXY has dropped 5% the past month. The currency ETF tracks the movement of the yen versus the U.S. dollar.

“Voters will go to the polls on Sunday in parliamentary elections. And if recent polls are correct, they should clear the path for Shinzo Abe to become Japan’s next prime minster in a coalition government,” CNNMoney reports. “Should Abe return to become the seventh, he will inherit an economy in recession, according to the government’s latest estimates.”

Last month, the Bank of Japan kept its monetary policy unchanged following stimulus measures in September and October. It said it expects the economy to remain “relatively weak” amid “a high degree of uncertainty.”

Abe also wants to increase stimulus spending — including on infrastructure projects, CNNMoney reports.

“But the real target of more monetary stimulus is not guaranteed. The central bank could refuse or ignore Abe’s calls for action,” it added. “Should the central bank complicate his plans, Abe will be left with little room for maneuvering. Japan’s government is the most indebted major country in the world, and faces tough budget decisions on a regular basis.”

Bond guru Jeff Gundlach recently said one of his high-conviction investing ideas is to buy Japanese stocks and short the yen. “In Gundlach’s view the Japanese government is out of options, and is therefore going to start debasing the yen in order to stimulate growth.  As this happens we should see the yen weaken and the Japanese stock market rally,” reports David Waring at Learn Bonds.

CurrencyShares Japanese Yen


The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.