Yen rockets through 128 again

By staff and wire reports

TOKYO, Japan -- The Japanese yen burst above 128 to the U.S. dollar again on Tuesday morning, after comments from Japan's Finance Minister.

Masajuro Shiokawa drove the yen's weakening, which saw the Japanese currency set a new three-year weak level against the dollar, at 128.27.

The yen started a breakout last week against the U.S. dollar, a move that has continued this week, bidding the currency up to levels not seen since the aftermath of the Asian financial crisis.

Shiokawa fueled its rise again Tuesday morning. As the central Bank of Japan begins a two-day policy meeting, the finance minister said he wants the central bank to provide ample liquidity for Japan's economy.

More easing possible at BOJ meeting

Shiokawa added that further easing of its already lax monetary policy was possible. Easing would weaken the yen even more.

He said he hopes the central bank will raise the level of current account holdings at the central bank to 14 trillion yen by year-end. Increasing the amount of cash in the current account injects more liquidity.

"There will be a lot of fund demand around the end of the year, so I want the Bank of Japan to watch the trend closely and offer enough funds," Shiokawa said at a press conference.

Traders believe officials have given the go-ahead to weaken the yen, with a lax stance on its rise against the dollar.

So this move is unlikely to be the end of the yen's run, experts say.

Affecting rest of the region

Japan's former deputy finance minister, Eisuke Sakakibara, predicted over the weekend that the yen could even hit 140 against the dollar. Sakakibara is known as "Mr. Yen" after taking a prominent role in weakening the currency in the mid-1990s.

Some experts say it might get as weak as 170 to the dollar by late next year.

A weaker yen will help boost Japan's exports, by making Japanese goods cheaper overseas. The government has been calling on the BOJ to do more to prop up Japan.

But the central bank doesn't have a lot of options. BOJ Governor Masaru Hayami has said that the bank will not buy foreign bonds such as U.S. Treasuries, a controversial move that some have recommended as a way of easing the yen and deliberately kick-starting the economy with inflation.

Hayami has also said he sees no need for the BOJ to buy more government bonds or start buying corporate bonds. Both moves have been floated as ideas for helping Japan.

The yen's weakening poses a problem for currencies such as the South Korean won and the Taiwanese dollar. Those currencies typically need to weaken in stride with the yen, so that Korean and Taiwanese companies can still compete with their Japanese peers.

And indeed the Taiwanese dollar closed at a three-year low against the U.S. dollar on Monday, at 34.85 to the greenback.

The Korean won had been getting stronger on the back of a fiery performance from its stock markets since September.

But it has also weakened during the yen's run. It was trading around 1295.7 against the dollar on Tuesday.

The Singapore dollar had also weakened on Tuesday and the Thai baht was drifting weaker, too.