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Weak US Jobs Report Could Force BOJ to Act: Economist

The Bank of Japan must act to head off further strengthening in the currency, an economist told CNBC on Monday, after the yen rose to a one-month high versus the dollar on the weaker than expected U.S. jobs report.

Yen coins and banknotes
Image Source | Getty Images
Yen coins and banknotes

"With the Yen appreciating from 85 to 81, what the BoJ did in February is losing effect," Takuji Okubo, the Chief Japan Economist at Societe Generale Corporate & Investment banking said on Monday, referring to the central bank's expansion of asset purchases and its establishment of an inflation target of 1 percent earlier this year.

The BoJ's actions in February helped to weaken the yen to 83.71 versus the dollar by mid-March. But in recent weeks the currency has once again been strengthening as investors have become more wary about risk. A stronger yen hurts Japan's export-dependent economy.

On Monday, the greenback hit a one-month low against the yen, after the U.S. economy added fewer jobs than expected last month. The figures supported views that the Federal Reserve will ease policy further to support the economy. The Yen's attraction as a safe haven has also been boosted by tensions over a North Korean rocket launch.

According to Okubo, the central bank could signal its resolve to print more money by changing its inflation target at its two-day meeting, which is currently under way.

"We think the BoJ could potentially raise its inflation target from 1 percent to 2 percent. With this the BoJ could show more explicitly that (it) is trying hard to fight deflation ," Okubo said.

In the meantime as the yen continues to strengthen, one analyst says it could create a buying opportunity.

"If the U.S. Fed does not do a QE 3, U.S. rates will start going up again, and as such dollar-yen will be a buy," Harry Ida, senior analyst at Thomson Reuters told CNBC on Monday. "I think 80 or below 80 will be a very good buy for Dollar-Yen."

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