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SINGAPORE : Currency experts said the Japanese yen is likely to come down from its record highs.
Money managers at Franklin Templeton believe Japan's central bank will act to allow the yen to gradually drop against the US dollar over the next few years, as a strong yen is likely to hurt the country's exports.
The Japanese yen hit a fresh 15-year high against the US dollar on Wednesday.
This has sparked concerns that Japan's exports are getting more expensive and harder to market to the rest of the world.
Michael Hasenstab, a portfolio manager of Templeton Global Bond Fund said: "We think the Japanese yen is vulnerable. Also, conditions in Japan right now are purely supported by its export sector. And the strong yen is putting a lot of pressure there.
"So we would expect the Bank of Japan to continue to adopt very easy monetary policies, which ultimately will weaken the yen."
The yen has risen 11 per cent against the dollar so far this year.
It traded at around 84 yen against the greenback on Wednesday, driven by concerns over the patchy economic recovery in the US.
But Franklin Templeton projects that the yen will fall by about 10 per cent against the US dollar over the next few years.
"The US dollar will likely outperform the yen, given that the conditions are difficult in both (countries), but probably less difficult in the US. And so, Japan probably faces bigger headwinds than the US," said Hasenstab.
The fund management firm added that Japan has been facing deflation for almost a decade and it is unlikely to come out of it soon.
Meanwhile, observers said the US will not follow Japan's footsteps, and they expect the Federal Reserve to implement more fiscal policies should concerns over deflation arise. - CNA /ls
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