Tokyo - The yen fell to its lowest level in more than two
years on Friday, lifting Japanese stocks to 21-month highs on expectations of
drastic monetary easing, while shares in the rest of Asia rose as Washington
races to avoid a fiscal crisis.
US President Barack Obama and lawmakers are launching a last
round of budget talks before a New Year deadline to reach a deal or watch the
economy go off a "fiscal cliff," that economists fear will push the
United States back into recession and stamp out fragile signs of recovery
"A big issue is being made of it, but eventually
they'll do something to kick the can down the road," said Steven Robinson,
senior investment manager at Alleron Investment Management in Sydney.
European shares were seen flat to higher, with financial
spreadbetters predicting London's FTSE 100. FTSE, Paris's CAC-40. FCHI and
Frankfurt's DAX. GDAXI would open little changed to as much as 0.3% higher. US
stock futures suggested a steady Wall Street start.
MSCI's broadest index of Asia-Pacific shares outside Japan.
MIAPJ0000PUS rose 0.5%, hovering around a near 17 month high. It has gained
about 18.7% this year, a sharp turnaround from an 18% plunge in 2011.
Australian shares. AXJO rode iron ore stocks up to finish at
a 19-month high, with a recovery in battered mining shares driving the market
to its strongest annual gain since 2009. Hong Kong shares. HSI hovered near a 17
month high with a 0.1% gain and Shanghai shares. SSEC jumped 0.8%.
"The US fiscal cliff will continue to direct crude
prices until it's resolved," said Natalie Rampono, a commodities analyst
at ANZ in Melbourne.
As well as being deadline day for the fiscal cliff, December
31 is the date the federal government is set to reach its $16.4 trillion debt
limit. The Treasury will have to take measures to buy time for the government
to approve a rise in the debt ceiling.
A similar political stalemate over raising the federal debt
limit in the summer of 2011 raised fears over a U.S. default, and prompted Standard
& Poor's to strip the US of its top-notch credit rating, causing turmoil in
Asian bond issuance jumped to $133.8bn so far this year,
eclipsing the previous year's tally of $76.34bn, as retail investors stepped up
purchases of the region's corporate bond. Those bonds have returned nearly 20%
this year, outshining Asian equities.
Japan remains in focus
Under the leadership of Prime Minister Shinzo Abe, who took
office earlier in the week, Japan is speeding up efforts to turn around its
economy, battered for decades by its strong currency and persistent deflation.
A survey on Friday showed Japanese manufacturing activity
contracted in December at its fastest pace in more than three years while core
consumer prices fell last month and industrial output plunged 1.7% in November
Abe's repeated calls for "unlimited" monetary
easing and policies aimed at reducing the yen's strength have bolstered
expectations of a sustained period of yen weakness. This has lifted the mood in
Japanese stocks as a weaker yen improves earnings prospects for the country's
The benchmark Nikkei average .N225 closed up 0.7% at a 21
month high, ending 2012 with the sharpest yearly gain since 2005. Japanese
markets will be closed for New Year's holidays and will resume trading on
"The Japanese equity market has turned positive,
providing good sentiment for global investors, with many making money and
putting the money into commodity markets such as oil market," said Tetsu
Emori, a commodity fund manager at Astmax in Tokyo.
The dollar climbed to its highest since August 2010 of
¥86.64 on Friday. The yen is on track for a drop of more than 12% this year,
its steepest since 2005. The yen also fell to a 17-month low against the euro
at ¥114.675 on EBS on Thursday.
The Australian dollar hit a 20-month peak against the yen of
around ¥89.83, according to Reuters data.
The Japanese government will compile spending requests for a
stimulus package on January 7 and finalize the proposal shortly thereafter as
Abe tries to quickly enact his agenda of increased public works spending to
boost the economy.