February 10, 2000 
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| February 10, 2000 | atimes.com | |
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| Japan Yen to keep falling, says Merrill Lynch SEOUL - Merrill Lynch predicts the Japanese yen will keep falling against the US dollar, to the 118-yen range in six months' time, compared with the present 109-yen range. The Merrill Lynch report, quoted by the Korea Center for International Finance, says the difference between US and Japanese currency policies, and the basic differences between the two economies, will cause the dollar to rise. US GDP growth will likely reach 4 percent even if the Federal Reserve Board raises interest rates again this year, considering growth was 5.8 percent in the fourth quarter last year. Japan's growth is likely to be 1.5 percent due to employment instability and a decline in disposable incomes this year. Expansion of the gap between US and Japanese national bonds on the rise of US interest rates also leads to the possibility of a weaker yen. Capital is likely to move from Japan to the US because of the higher profitability of US national bonds. Outflow of capital on Japanese banks' advances into foreign countries is another reason for the decline of the currency, as Japanese banks are likely to offer more and more overseas loans due to an increase of Japanese direct overseas investments. The reduction of Japan's trade surplus will also cause the yen to fall. Japan is importing products manufactured in overseas factories built by Japanese companies. Eleven percent of all consumed products in Japan are imported, and 70 percent of those are manufactured in Japanese factories overseas. The US Federal Reserve Board's policy of raising interest rates to block pressure for price rises is likely to continue, while Japan will likely keep to a policy of very low interest rates as economic recovery is delayed. An additional rise of US interest rates will widen the gap of call interest rates between the United States and Japan. An increase in Japanese government debt, to the extent of threatening the country's credit ratings, will also lead to traders selling the yen. (Asia Pulse/Yonhap) | |||||||||
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