Yen holds gains on underwhelming Japan stimulus
On Tuesday, the country’s Prime Minister Shinzo Abe announced details of a fresh round of stimulus worth a whopping 28 trillion yen ($273 billion), but the latest in several attempts over the years fell flat.
The measures, which included infrastructure spending and efforts to raise the birthrate, did little to inspire hopes for Abe’s more than three-year-old bid to defeat deflation.
Some economists are voicing growing scepticism about his “Abenomics” policy blitz, comprised of a succession of huge fiscal spending and aggressive monetary policy, while promised reforms have been slow in coming.
Tuesday’s package came after the Bank of Japan underwhelmed markets last week with only modest tweaks to its own stimulus steps.
That and a drop in oil prices boosted investor appetite for the yen, which is seen as a safe haven asset in times of turmoil or uncertainty.
“Forex markets have been in risk-off mode over the past day, as concerns grow about Japan’s woefully limited economic package and as oil prices plunge, stoking fears that global growth is stagnating,” Stephen Innes, senior trader at OANDA Asia Pacific, wrote in a commentary.
“Ultimately, without any meaningful and sustained stimulus commitment from Japan’s policy makers, the outlook for the dollar/yen looks extremely vulnerable.”
On Wednesday, the dollar bought 100.97 yen, nearly flat from 100.90 in New York, where it had tumbled in reaction to Tokyo’s stimulus.
The greenback was above 102 yen in Asian trade on Tuesday before the official announcement.
The euro fetched $1.1212 and 113.26 yen, little changed from $1.1224 and 113.25 yen in New York.
The dollar has come under pressure since last week, when US second quarter GDP growth came in at a much lower-than-expected 1.2 percent.
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