Pound Sterling to Japanese Yen (GBP/JPY) Exchange Rate – Record trade deficit sends Yen lower

Pound to Japanese Yen exchange rate chart

The Japanese Yen weakened against the Pound and snapped its two-days of gains against the US Dollar and Euro after data released by the Japanese government showed that the nation’s trade deficit widened to a record deficit in 2013.

The deficit climbed due to the increase of fuel imports which have been rising since the 2011 earthquake and after the Fukishima nuclear disaster caused the Japanese government to cut back its use of nuclear power. Now the nation has to import most of its energy needs from elsewhere due to the lack of natural resources.

According to the Bank of Japan the nation’s monthly trade deficit climbed to 1.3 trillion Yen which marked an 18th consecutive deficit. On a yearly basis the deficit hit a record of 11.5 trillion Yen.

The Yen is expected to continue declining over the next few days as investors look ahead to the start of the US Federal Reserve’s two-day long policy meeting on Tuesday.

“The trade deficit is a factor for Yen weakness over the medium to long-term,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co.

Japanese companies are said to be struggling due to the rapid decline of the Yen against its major currency peers. Companies such as Nintendo have reported steep losses and have cut their sales forecasts.

Wednesday will see the release of Japanese retail sales data which is expected to show a decline for December. If so then the data will add credence to the view that the Japanese economy is slowing and that Prime Minister Shinzo Abe’s economic policy may be faltering.