Yen moves higher on concern over negative rates

[TOKYO] The yen rebounded in Asia on Thursday from the previous day's losses as traders grew concerned about the effects on the economy after reports said the Bank of Japan could cut interest rates deeper into negative territory.

The US dollar topped 103 yen briefly on Wednesday after the top Nikkei business daily said the central bank would discuss the rates move when policymakers meet next week.

"Minus interest rates are supposed to make the yen weaker, but if the move triggers concerns over the potential negative impact on the overall economy, the yen could strengthen again," Naoki Fujiwara, chief fund manager with Shinkin Asset Management, told Bloomberg News.

The US dollar traded at 102.30 yen in afternoon trade, down from 102.38 yen in New York late Wednesday.

The euro slipped to 114.96 yen from 115.18 yen.

The BOJ stunned markets in January when it adopted a negative interest rate policy to work alongside its massive asset-purchase programme as part of a drive to kickstart bank lending and, in turn, inflation and the economy.

However, the move was criticised at the time as being a desperate move following the failure of years of stimulus, while banking shares have been battered as it hits their bottom lines. The yen has jumped about 15 per cent since the move was announced.

A weaker yen has been a key component of Prime Minister Shinzo Abe's attempts to spark expansion in Japan's economy and restore inflation.

Traders worldwide are focusing on policy meetings by the Bank of Japan and Federal Reserve next week, hoping they will clear up some uncertainty about monetary policy in two of the world's biggest economies.

The euro was changing hands at US$1.1244 from US$1.1250 in New York.

AFP