Yen Summer Fling Ending as Japan Economy, Rates Slow

Aug. 13 (Bloomberg) -- The yen's seven-week rally is about to end.
New York-based JPMorgan Private Bank and Mitsubishi UFJ Asset Management Co. in Tokyo say they are selling the yen because five straight months of declining consumer prices will delay an increase in interest rates by the Bank of Japan, the one thing that would justify further gains. A government report today showed second-quarter economic growth slowed more than expected.
Gross domestic product eased to less than a third of the first-quarter's pace and a global credit crunch may make it harder for the Bank of Japan to justify raising borrowing costs from 0.5 percent, the lowest in the world. In the yen's first failure to rise last week since the five days ended July 6, the currency fell 0.3 percent to 118.40 per U.S. dollar.
``There are no Japanese reasons for the yen to rally,'' said Robert Robis, an international fixed-income portfolio manager at OppenheimerFunds Inc. in New York, which oversees $250 billion. ``The economic data are looking worse, not better. Without consumption or inflation picking up, it is hard to justify a BOJ rate hike.''
Since its low this year of 124.13 per dollar on June 22, the first full day of summer in the Northern Hemisphere, Japan's currency has risen 4.6 percent against the dollar. Of the 16 major currencies, only the Swiss franc's 2.55 percent gain comes close to the performance of the yen. The yen was at 118.36 at 7:40 a.m. in London