USD/JPY:Japan’s Intractable Fiscal Woes Sink the Yen

The Japanese yen plummeted by 87 pips as opposed to the American dollar in yesterday’s Asian session, its weakest level in seven days on prospects upcoming elections in Japan will hand power to the opposition party that has advocated more aggressive monetary easing.

Japanese Prime Minister Yoshihiko Noda is expected to dissolve parliament on November 16, triggering an election that polls show his party will lose three years after ending the Liberal Democratic Party’s half-century grip on power. The disapproval of the public is estimated to slump below 20 percent after three prime ministers in as many years failed to revive growth, end deflation or enact campaign promises on social spending. The economy is definitely the major issue facing the Japanese seeing that a lot of those economic and fiscal problems are intractable, creating a temptation for leaders to dabble in other issues that aren’t so difficult.

Meanwhile, reports from the US state that the economy is expected to recover though at an agonizingly slow pace. The cause of the slowdown is believed to stem largely from a stunt in structural shifts in its workforce and the dearth of investment on the nation’s potential growth rate. However, President Obama is continuing to repair the dysfunctional Washington which may lead to pushing the economy into recession.

Hence, as the US President promotes his tax reforms to Congress while Japan struggles with an unending impasse over financing their budget, the USD/JPY pair is recommended apt to be bought.

Aviv N. Shapiro is a Senior Research Analyst and Business Development Officer for AlgosysFx.