Yen Falls to Six-Year Low on BOJ Easing

by on October 31, 2014 9:10 am BST

The yen weakened beyond 111 per dollar for the first time in more than six years after the Bank of Japan unexpectedly increased monetary stimulus.

Japan’s currency slumped as much as 2.1 percent, the most since the central bank first expanded stimulus in April 2013. The BOJ said it would expand the monetary base by 80 trillion yen ($719 billion) a year from a previous 60 to 70 trillion yen. The yen also fell as the $1.2 trillion Government Pension Investment Fund said it would boost holdings of foreign assets.

The yen slid 1.9 percent to 111.37 per dollar at 8:39 a.m. in London after depreciating to 111.53, the weakest since January 2008. Japan’s currency slipped 1.6 percent to 139.93 per euro. The dollar gained 0.4 percent to $1.2567 per euro.

The BOJ led by Governor Haruhiko Kuroda said it will purchase exchange-traded funds so their amounts outstanding increase by about 3 trillion yen a year. Japanese real estate investment trusts will be purchased with a view to raising their amounts outstanding by about 90 billion yen annually, according to the central bank.
‘Deteriorating Data’

The yen has slumped 2.4 percent this week, the worst performer of 10 developed-nation currencies. The euro dropped 0.2 percent, while the dollar gained 0.8 percent.

The yen had already weakened before the BOJ decision as the Nikkei newspaper reported that the GPIF would announce an increase in holdings of overseas stocks and bonds.

In a press conference held later, the GPIF said it would boost its target holdings for both local and overseas shares to 25 percent each from 12 percent, confirming the Nikkei report. The world’s biggest pool of retirement savings will seek to hold 15 percent of its portfolio in foreign bonds, up from 11 percent, and reduce domestic debt to 35 percent from 60 percent.