Yen set for longest monthly decline in 12 years on BOJ easing

The yen headed for its longest string of monthly losses in more than a decade on prospects lingering deflation will prompt Bank of Japan Governor Haruhiko Kuroda to boost stimulus measures at a policy meeting next week.

The Japanese currency slid versus the dollar this quarter as Kuroda pledged action to achieve the central bank’s 2% annual inflation target. A report today showed Japan’s consumer prices slid in February at the fastest pace in 2 1/2 years. The euro is poised for a three-month drop against the dollar as Italy’s search for a prime minister continues and Cyprus’s bailout revived debt crisis concerns.

“People have been rebuilding yen short positions,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “The yen has come a long way, and prospects for it to weaken further will very much depend on what Kuroda does at the policy meeting next week.” Short positions are bets an asset will decline.

The yen fetched 94.07 per dollar as of 4:29 p.m. in Tokyo from 94.15 yesterday. It slid 1.6% since Feb. 28, set to complete the longest monthly falling streak since 2001.

Japan’s currency climbed 0.1% to 120.52 per euro and has gained 0.3% this month. The euro bought $1.2813 after rising 0.3% to close at $1.2816 in New York. It’s poised for a 1.9% monthly drop. Today is a holiday in Europe, the U.S., and much of Asia.

Japan’s currency has fallen 7.8% against the greenback since Dec. 31, headed for its biggest back-to-back quarterly decline since 1995. The euro has lost 2.9% over the same period.

Kuroda Pledge

Kuroda will preside over his first BOJ policy meeting on April 3-4. He said in testimony to parliament this week that he wants to achieve the central bank’s price target in two years. The central bank’s policies may become aggressive and experimental under Kuroda, Pacific Investment Management Co., which runs the world’s biggest bond fund, said on its website.

Japan’s consumer prices fell 0.7% in February from a year earlier, compared with a 0.3% decline in the previous period, the statistics bureau reported in Tokyo today. That’s the biggest drop since August 2010 and in line with the median estimate of economists surveyed by Bloomberg News.

Core consumer prices, excluding fresh food, declined 0.3%, failing to rise for a 10th month.

“The fact that deflation is persisting just increases the pressure to make sure he comes out from that first meeting doing something big right from the start,” Nicholas Smith, a Japan strategist at CLSA Asia-Pacific Markets Ltd. in Tokyo, said in a Bloomberg Television interview. “We’re probably going to weaken from the present 94 yen to the dollar to about 100, I would have thought, perhaps within this year.”

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