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Forex - USD/JPY higher as Abe continues tough talk

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Investing.com - The Japanese yen extended its losing ways against the U.S. dollar and other major currencies in Monday's Asian session after Prime Minister Shinzo Abe said he is looking for a "bold policy leader" as the next head of the Bank of Japan.

In Asian trading Monday, USD/JPY rose 0.47% to 89.62. Ahead of Bank of Japan Governor Masaaki Shirakawa's speech later today, the yen sank to its lowest levels since 2010.

Traders are still calling for a correction to the upside for the yen, but most do not foresee that happening until after the Bank of Japan's meeting later this month. Japanese financial markets are closed today due to a national holiday.

Shirakawa's term ends in April. During his campaign for prime minister and following his mid-December triumph, Abe has not been shy about saying BoJ needs to align its easing and inflation targets with his own. Abe has gone so far as to threaten to revoke a long-standing Japanese law that guarantees the central bank's independence if BoJ does not engage in unlimited monetary easing to depress the yen.

Abe also wants BoJ to raise its inflation target, currently 1%, to his target of 2%. Traders are widely anticipating the central bank will do just that when it concludes a two-day meeting on January 22.

Last week, the prime minister unveiled a JPY10.3 trillion stimulus package aimed at bolstering the flailing Japanese economy, the world's third-largest. Some analysts have said the stimulus program could boost Japanese GDP growth to 3.5% in the second quarter.

In media interviews over the weekend, Abe said he would also like to increase defense spending in the next fiscal year and that he is hoping for a summit with U.S. leaders as soon as next month.

Elsewhere, EUR/JPY surged 0.89% to 120.08. The pair sought to test support at 117.63, the previous low, and cracked resistance at 119.79, the high from May 5, 2011. AUD/JPY rose 0.59% to 94.53.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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