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Continued yen depreciation could pose concerns for Asia

Published Wed, Nov 5, 2014 · 09:50 PM

THE Japanese yen's dramatic depreciation over the last week - which looks set to continue - could potentially have a serious impact, not only on Japan but also on Asian and other emerging-market economies.

The yen has gone from 105 against the dollar to near 115 since Oct 16, with most of the move coming since Nov 1, after Bank of Japan (BOJ) governor Haruhiko Kuroda stunned the markets by announcing a major acceleration of quantitative easing.

If the BOJ continues with its ambitious asset-purchase programme, its balance sheet could soar to the equivalent of about 70 per cent of gross domestic product by the end of next year, more than double that of the US Federal Reserve, as a proportion of the economy. Mr Kuroda seems determined to stay the course. Speaking at a seminar on Wednesday, he reiterated that there is no change to the Bank's policy of trying to achieve 2 per cent inflation "at the earliest date possible" and that there are "no limits to our policy tool…

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