Monday, August 31, 2009

Goldman Sachs expects weakening of the yen

Japanese yen rose in trading in Asia on Monday after the Democratic Party of Japan won the elections to the lower house of parliament. In part, this growth of the Japanese currency due to expectations that after coming to power, the party will focus on increasing domestic demand, and this may affect the attitude towards the strengthening of the national currency. However, in the medium and long term if undertaken by the Japanese Democratic Party of measures to stimulate spending will lead to a deterioration of the already very fragile state of the state budget, which, according to analysts Goldman Sachs, could adversely affect the national currency. While the Democratic Party of Japan leader Yukio Hatoyama said the party formed the government in 2010 fiscal year will not raise the issue of state bonds, bank pay attention to the fact that, in reality, most of the measures taken by the new administration will require additional fiscal expansion. As a result, the state budget deficit in Japan may increase from 5.0% of GDP in fiscal year 2008 to 9.5% in 2010 fiscal year. And that could lead to lower consumer spending and increase savings rates comes amid growing public concern about the increasing budget deficit, and, accordingly, a reduction in tax revenues. Thus, currency strategist at Goldman Sachs expect weakening the yen over the medium to long term because of the deteriorating balance of payments - according to analysts the bank over the next 3-12 months pair dollar / yen will trade in the range 98 - 105. Now pair dollar / yen is near 93.00.

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