The Japanese yen reached a new 27-month low on Wednesday as Japan’s new government came into power and Shinzo Abe was officially named the country’s latest prime minister. Dropping to 85.63 yen to the U.S. dollar, this was the lowest the currency has been since September 21st, 2010. This rapid weakening of the yen has been prompted by Abe’s pledges to pressure the Bank of Japan into additional easing of its monetary policies and to begin a policy of inflation in order to turn the country’s economy around.
This is the second time the yen has made such a drastic drop in the month of December, with the first taking place Monday the 17th, the day after Abe’s Liberal Democratic Party (LDP) was named the winner of Japan’s general elections. While Abe’s campaign pledges heavily focused on taking a stronger diplomatic stance against China over the territorial dispute involving the Senkaku/Diaoyu Islands, the new prime minister is now seen as making it clear that reviving the Japanese economy and fighting deflation are the number one priority.
For a significant amount of time now the yen’s unending strength against other worldwide currencies has wreaked havoc on Japan’s exports-reliant economy. With dwindling demand from Europe, where the debt crisis also plays a big factor, due to high prices, the Japanese manufacturing industry has only been able to manage little to no profits once its takes into account the costs of shipping products overseas. The yen has also weakened slightly against the euro, standing at 113.19 yen on Wednesday, up from 111.87 on Christmas Eve.
[via The Republic]