According to, Toyoo Gyohten, the president of the Tokyo based Institute of International Monetary Affairs, the Japanese economy may enter a short period of recession soon and that will slow down or even reverse the yen?s appreciation trend.
As the result of this possible recession, Japanese yen will be traded inside the 105-110 range against the U.S. dollar, while earlier analysis predicted that the 100 rate on USD/JPY will be broken in 2008.
Toyoo Gyohten, the former chairman of the Bank of Tokyo, said that the lack of growth in U.S. due to the housing crisis will affect emerging economies of Asia, and, as the Japan is tied to the region, it will also suffer major slowdown in economy.
As one of the main reasons for the yen to gain less than expected is its dependence on exports, which may decline or at least stagnate soon. On the other hand weaker yen will benefit exporting companies. He said:
The dollar and the yen are two weak currencies Japan is still very dependent on exports.
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