Yen Near 3-Year Low as Treasury Backs Japan Stimulus Plan

The yen traded 0.3 percent from its weakest in almost three years after a U.S. Treasury official signaled support for Japan’s efforts to end deflation before the Bank of Japan holds a meeting this week to decide on policy.

The yen held a drop from yesterday, the biggest in more than two weeks, after Haruhiko Kuroda, a potential contender for BOJ governor, said monetary stimulus by the central bank could be justified for 2013. Losses in Japan’s currency were limited before Group of 20 finance chiefs meet in Moscow from Feb. 15-16. The euro remained higher after European Central Bank council member Jens Weidmann said it isn’t overvalued.

“The yen seemed to have reacted to the comments from the U.S. Treasury supporting Japan’s policy to defeat deflation,” said Yuki Sakasai, a foreign-exchange strategist at Barclays Plc in New York. “The yen’s weakness will continue as long as the G-20 doesn’t criticize Japan by name.”

Japan’s currency added 0.1 percent to 94.22 yen per dollar at 9:40 a.m. in Tokyo from yesterday, when it slid as much as 1.8 percent to 94.46, the weakest since May 2010. It gained 0.1 percent to 126.32 per euro from yesterday, when it lost 2 percent. The 17-nation euro was little changed at $1.3404 from yesterday, when it touched $1.3325, the lowest since Jan. 24.

U.S. Treasury Undersecretary Lael Brainard said in Washington yesterday she supports efforts in Japan to end deflation and “reinvigorate growth. It will be important that structural reforms accompany macro economic policies to achieve these goals,” she said.

 (Source: Bloomberg)