Abe Sales-Tax Speculation Puts Japan’s Yen Into a Spin

By Kevin Buckland and Lucy Meakin

Prime Minister Shinzo Abe’s sales-tax deliberations are sending the world’s second-most traded currency pair into a spin.
The yen tumbled to a seven-year low and then retraced the losses, only to weaken again as traders tried to decode the latest signals from Japanese politicians over a potential delay in raising the levy. It extended a slide set off after the Bank of Japan on Oct. 31 expanded stimulus to a record and the nation’s pension fund outlined a plan to increase overseas investment. The dollar rose against all 16 of its major peers before U.S. data today forecast to show retail sales rebounded.
“The U.S. dollar is broadly stronger, and the dollar-yen is probably leading that,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney. “I don’t think anyone has really changed their overall view that most likely the sales-tax hike will be delayed.”
The yen slid 0.4 percent to 116.27 per dollar as
of 8:16 a.m. London time. It earlier touched 116.38, the weakest level since October 2007. It depreciated 0.2 percent to 144.77 per euro after sliding 0.6 percent yesterday. The 18-nation common currency dropped 0.2 percent to $1.2452.
The yen headed for a fourth week of losses in which it’s slumped more than 8 percent versus the dollar, the most among major currencies, as debate over an increase in the sales tax became the latest factor to weaken the currency.

Dissolve Parliament

Japan’s prime minister will hold a news conference next week to announce a delay in the sales-tax increase, Mainichi newspaper reported, without saying who provided the information. Abe will also explain the reasons for his decision to dissolve parliament at the news conference, according to the report.
Finance Minister Taro Aso said today an appropriate decision will be made on raising the nation’s sales tax, taking into account economic conditions. Abe is likely to clarify any new timeframe for raising the sales tax should he decide to postpone a planned increase, Economy Minister Akira Amari said in Tokyo.
“The market likes the idea of a snap election and a delay in the sales-tax hike, and the yen is being sold against the dollar,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “I expect the yen to keep edging toward 120 per dollar.”
U.S. retail sales last month gained 0.2 percent, according to a Bloomberg News survey of economists. They declined 0.3 percent in September.
The euro-area economy grew 0.1 percent in the third quarter from the previous three-month period, while a final report will confirm inflation accelerated 0.4 percent in October from a year earlier, the median estimates of economists in separate Bloomberg surveys show.
Germany’s gross domestic product expanded 0.1 percent in the third quarter compared with the previous period, when it contracted a revised 0.1 percent.
Australia’s dollar dropped 0.4 percent to 86.90 U.S. cents, paring its gain on the week to 0.6 percent. New Zealand’s currency fell 0.3 percent to 78.59 U.S. cents.