Tuesday during early deals, the yen fell against its major counterparts as Japan's jobless rate rose to a 3-year high, reflecting the current economic downturn with companies increasingly reducing their payrolls. The yen plummeted to a 4-day low against the dollar, euro, franc, pound and the kiwi.
The Ministry of Health, Labor and Welfare said today that Japan's seasonally adjusted unemployment rate increased to 4.4 percent in February, the highest since January 2006 and marking the fourth straight month of increase. February's 4.4% rate was up 0.3 percentage point from January and slightly above the market forecast of 4.3 percent.
The number of jobless people grew 330,000 from a year earlier to 2.99 million, the report said.
Rising unemployment and falling spending showed Japan is still stuck in its worst recession in 60 years and underlined the health of the global financial system, which was already buffeted this week by a possible bankruptcy of U.S. automakers.
Wages slid 2.7 percent as a record slump in exports forced manufacturers to slash production and overtime. Companies from Toyota Motor Corp. to NEC Corp. are firing thousands of workers, increasing pressure on the government to give more assistance to the nation's unemployment.
Household spending fell 3.5 percent, a 12th monthly decline, indicating domestic demand is unlikely to make up for the collapse in exports.
Japan is heading for its worst recession since World War II, as demand for its cars and electronics evaporates. Exports fell an unprecedented 49.4 percent in February from a year earlier. Factory output slid 9.4 percent from January, when it declined a record 10.2 percent, a report showed yesterday.
Suzuki Motor Corp., Japan's fourth-largest automaker, said yesterday it will shut some domestic factories for up to seven days next month to get rid of inventories.
Overtime compensation dropped an unprecedented 18.5 percent last month as manufacturers cut extra working hours by a record 47.7 percent, today's Labor Ministry report showed.
As recession fears increased in Japan following today's jobless report, the Prime Minister Taro Aso is expected to unveil the outline of a new stimulus package. Aso is set to meet the press later in the day to announce details of the steps, before leaving to London to attend a two-day Group of 20 financial summit from Wednesday.
Since Aso took office in September, he has announced stimulus measures through two plans totaling 10 trillion yen ($102 billion).
In order to rectify the nation's supply-demand gap, which stands at around 20 trillion yen, the government is expected to draft a large-scale extra budget to finance drastic steps to expand domestic demand and create jobs.
The latest indications of how badly Japan's economy is suffering and Aso's response are likely to weigh heavily at the G20 meeting, where leaders will address a crisis that has felled major banks and cost millions of jobs as the world faces its biggest recession since the 1930s.
Officials have already acknowledged that the G20 summit would fall short of an overhaul of the world economy. U.S. and European leaders have also differed over whether more spending or more regulatory reforms are the better response to the crisis.
Today's Japanese data came after markets tumbled yesterday as the U.S. President Barack Obama rejected the restructuring plans for General Motors and Chrysler. But the fall was short-lived, with some Asian stocks edging up today as some investors bet the most painful stretch of corporate earnings damage may be over as the first quarter and Japan's financial year drew to a close.
The yen declined to a 4-day low of 98.45 against the US dollar during early deals on Tuesday. If the yen weakens further, it may test support around the 98.9 level. At yesterday's close, the dollar-yen pair was quoted at 97.28.
The dollar soared as its safe-haven status renewed as fears of bankruptcy for U.S. automakers General Motors and Chrylser sparked a sharp drop in global stock markets yesterday.
The yen slipped to a 4-month low of 99.69 against the dollar on March 05. Although the dollar-yen pair eased thereafter, it bounced between 99.20 and 96.60 until the dollar was sold off massively on March 18 after the Fed surprised investors by announcing it would buy $300 billion worth of U.S. Treasuries for the first time since the early 1960s as part of a move to inject an additional $1 trillion into the U.S. economy by also purchasing more U.S. mortgage and agency debt.
The dollar tumbled to a 24-day low of 93.56 against the yen on March 19. Since then, the dollar-yen pair has appreciated 5% and reached a 9-day high of 98.88 on March 26.
In early trading on Tuesday, the yen fell to a 4-day low of 141.19 against the pound. The next downside target level for the Japanese currency is seen at 143.6.
The pound rose today as the consumer confidence in Great Britain improved more than the analyst's expectations. Data consolidator GfK said that consumer confidence was higher for the second consecutive month in Great Britain, suggesting that measures to end the recession are starting to take hold.
The consumer confidence index came in at -30 versus analyst expectations for a score of -37 following the -35 reading in February. British consumers became more optimistic about the general economic outlook over the next 12 months, also upgrading their assessment of the state of the economy over the past 12 months.
The yen surged to an 11-day high of 135.78 against the pound in Asian trading yesterday as a report by the property industry group Hometrack showed that the average price for a home in England and Wales plummeted by a record 10.3 percent on year in March.
Rising unemployment and the deepest economic contraction since 1980 are sapping demand for housing after prices tripled in the decade ending in 2007. March's annual fall was the biggest yet in Hometrack's monthly survey of estate agents and surveyors, which started in 2000 and has persistently reported lower price falls than official government data.
However, the yen pared its gains in European and New York deals and closed the day's deals at 138.88 against the pound.
Against the currencies of Europe and Switzerland, the yen slipped to a 4-day low of 130.67 and 86.06 during early deals on Tuesday. If the yen moves down further, it may likely target 133.9 against the euro and 87.8 against the franc. The euro-yen and the franc-yen pairs were worth 128.45 and 84.75, respectively at yesterday's close.
The euro gained on speculation assets denominated in the European currency will maintain their advantage over those in Japan even as the ECB policy makers reduce interest rates this week. ECB President Jean-Claude Trichet and his colleagues will probably lower borrowing costs to 1 percent from 1.5 percent at the meeting.
ECB council member Axel Weber said this month that the central bank shouldn't cut interest rates below one percent.
Amid expectations that the ECB will slash rates, the market is focusing on whether the central bank will open the door for quantitative easing as its counterparts in the United States, Britain and Japan have already done.
The yen also weakened to a 4-day low of 56.07 against the New Zealand dollar in early trading on Tuesday. On the downside, 56.4 is seen as the next target level for the yen. The kiwi-yen pair closed yesterday's North American session at 54.85.
In economic news, the National Bank of New Zealand said today that a net 39.3 percent expect deterioration in business conditions over the year ahead, compared with a net 41 percent in February. A net 21 percent are expecting tougher times for their own business over the year ahead, slightly off December's record low reading of minus 22.
During early deals on Tuesday, the yen edged down against the currencies of Australia and Canada. At about 11:45 pm ET, the yen touched lows of 67.92 against the aussie and 78.43 against the loonie, compared to Monday's close of 66.31 and 77.10, respectively. The next downside target level for the Japanese currency is seen at 68.3 against the aussie and 80.5 against the loonie.
The Reserve Bank of Australia's financial aggregates data for February showed that credit issued to the private sector in Australia was up 5.4% on year in February, while credit issued was steady with a 0.5% gain on month.
The French February housing starts, Italian January retail sales, German March unemployment rate, Euro-zone and the Italian CPI reports for March are slated for release in the upcoming hours.
Across the Atlantic, today will be a busy day with the releases of the S&P/Case-Shiller home price index for January, Chicago PMI for March and the consumer confidence report for March.
Also, Philadelphia Federal Reserve Bank President Charles Plosser is scheduled to deliver a speech on regulatory reform to the University of Chicago Booth School of Business at 1 pm ET.
From Canada, the GPD report for January and the industrial product price index for February are expected.
Financial markets also look forward to the Bank of Japan's Tankan survey report, which is scheduled for tomorrow. Analysts expect Japan's business sentiment fell to minus 55 in the first quarter from minus 24 in the fourth quarter. If the report comes in worse than expected, the yen may come under heavy selling pressure.
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