Japanese Yen Weakens As New PM Abe Takes Office

The Japanese yen hit a 20-month low of 85.38 yen against the dollar as the new Prime Minister Shinzo Abe announces cabinet.

Shinzo Abe spoke earlier and promised to carry out bold monetary easing and flexible fiscal policy. He indicated that he has ordered his ministers to work towards Japan’s economic recovery which is the mission of the new government.

In addition to the generous promises to improve public works spending by as much as 10 trillion yen ($119 billion), according to party officials — Abe is also pressuring the Bank of Japan to work more closely with the government to reach the 2 per cent inflation target. The Japanese yen is underperforming against all of the G10 currencies. USD/JPY climbed to levels that have not been seen since September 2010 as the pair rose to a session high of around 85.73. GBPJPY is trading at 137.68, while EURJPY hit the year-high of 112.69 this morning.

Meanwhile, as Christmas winds down, President Obama is set to return from his Hawaiian vacation Wednesday to resume the so-called “fiscal cliff” negotiations. With a week remaining before the nation moves to this “cliff”, Americans are increasingly pessimistic about reaching a deal that will avert the looming tax increases and government spending cuts.