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Yen weakens, JPY rising towards 116 - BTMU

FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ sees USD/JPY rising back towards 116.00 due to a moderately weaker Yen because of the sales tax hike planned next year and the snap election speculation.

Key Quotes

"The yen has weakened modestly in the Asian trading session with USD/JPY rising back towards 116.00. Yen weakness has been reinforced in the near-term by heightened speculation that Prime Minister Abe will delay the sales tax hike planned for late next year and then call a snap election."

"Bloomberg news has also reported overnight that delaying the sales tax hike could add stimulus totalling as much as JPY4.6 trillion according to a LDP discussion paper that they have obtained."

"In addition, the discussion paper stated that delaying the sales tax hike by about eighteen months would add about 0.5% to real economic growth, which they estimated would have a bigger impact on the amount of tax raised than increasing the sales tax and risking another economic contraction."

"The combination of already more aggressive monetary easing and looser fiscal policy if the sales tax hike is delayed should prove more supportive for economic growth and encourage yen weakening capital outflows in the year ahead."

"A final decision from Prime Minister Abe on the sales tax hike could come any time from next Tuesday according to Economy Minister Amari as quoted in the Nikkei."

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