The yen resumed weakness after Japan’s government approved the appointment of Haruhiko Kuroda as new Bank of Japan governor on Friday, who will replace outgoing Masaaki Shirakawa who is stepping down on March 19.
Kuroda is expected to take bold action that could finally jump-start Japan’s economy that has been plagued by the global financial crisis. He has criticized the Bank of Japan for not taking action and implementing policies to deal with the deflation that has plunged the Japanese economy into its worst recession in a decade.
New Prime Minister Shinzo Abe is also a strong proponent of aggressive monetary policy and has a strong ally in Kuroda to support his plans to adopt measures to ease monetary policy and increase government spending.
Deflation, which results in falling prices, discourages investment and spending by businesses and consumers, and makes debts more difficult to repay.
68-year-old Kuroda has pledged to whatever it takes to reflate the Japanese economy and bring inflation up to a 2 percent target. Kuroda said in a parliamentary hearing earlier this week that “Speed is of the utmost importance”.
“I intend to pursue bold monetary easing, both in scale and in quality,” he added.
As a result of Kuroda’s pledge for more aggressive monetary policy, the yen has depreciated substantially, since such quantitative easing measures tend to dilute the strength of a currency.