The yen slid versus the dollar in its longest weekly losing streak in almost a quarter-century on speculation Japanese policymakers were preparing measures to stimulate the economy that may debase the currency.
The yen touched a 30-month low versus the dollar after Japan's government said it would spend •10.3 trillion yen (Dh424.29 billion) in new stimulus efforts.
"The overall trend remains a downward one for the Japanese currency," said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union.
"The key to the outlook for the yen is going to be whether or not the Bank of Japan takes that aggressive stance that the market anticipates, and to see how successful the government is at stimulating."
The yen lost 1.2 per cent to 89.18 per dollar in New York trading last week and reached 89.45, the weakest level since June 28, 2010. It was the currency's ninth weekly loss, the longest stretch since 10 weeks ended in February 1989. The Japanese currency tumbled 3.3 per cent to 119.01 per euro in its fifth weekly loss and touched 119.35, the least since May 2011.
The central bank is set to adopt the 2 per cent inflation target advocated by the Japanese prime minister Shinzo Abe, doubling its existing goal of 1 per cent, without setting a deadline for achieving it, according to people familiar with discussions within the BoJ. They requested anonymity because the talks are private.
The central bank is "signing up to the government's policy stance", said Jeremy Stretch, the head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. "For now, everyone is getting on to this train, and the question now is how far the yen can weaken."
The yen's 8.9 per cent drop over the past month was the biggest among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar lost 0.7 per cent, while the euro rose 2.2 per cent.
The Japanese government on Friday approved the •10.3tn stimulus package that will include infrastructure spending, as well as incentives for increasing business investment.
The government forecasts that the stimulus will boost Japan's economy, the world's third largest, by 2 per cent and create 600,000 jobs. The economy has been hit by lower exports amid slowing global demand and subdued domestic consumption.
Also included in the spending package are plans to rebuild areas devastated by the earthquake and tsunami of 2011, support for regional economies, and more investment in education and social security.
Meanwhile, the economic revival minister Akira Amari expressed a negative view yesterday about including employment stabilisation as a policy goal in a written agreement the government is seeking to conclude with the BoJ.
"The Bank of Japan is responsible for achieving economic growth through price stabilisation, and it should deal with employment [stabilisation] in an indirect manner," said Mr. Amari.
The prime minister has urged the central bank to ease monetary policy more aggressively to help Japan to fight chronic deflation and address the negative impact on the economy from the strong yen.