Yen Falls as Aso Gives No Stimulus Details; Irish Spread Widens

By Justin Carrigan

March 31 (Bloomberg) -- The yen fell against the dollar, heading for its biggest quarterly loss since 2001, on growing concerns that Japan isn’t doing enough to stimulate the world’s second-largest economy.

Japan’s currency dropped 1 percent against the dollar and 1.6 percent versus the euro after Prime Minister Taro Aso told reporters in Tokyo the government has yet to complete a stimulus package. The Nikkei 225 Stock Average declined for a third day.

Aso’s comments underscored the challenges government officials and central bankers face in fixing banks and ending the first global recession since World War II. The gap between yields on Irish 10-year government bonds and German debt widened 10 basis points to 248 basis points after Standard & Poor’s removed Ireland’s AAA credit rating yesterday. The average spread in the past decade is 18 basis points.

There’s “no sign of a bottom yet,” said George Magnus, a senior economic adviser in London at UBS AG, Switzerland’s biggest bank. “The cycle is still troublesome, and we still haven’t got a fix on the banking system yet, which is essential.”

In stock markets, investors focused on the prospect of an economic recovery later this year.

European shares rallied from the biggest drop in four weeks as Marks & Spencer Group Plc posted sales that beat analysts’ estimates and commodity producers climbed. The Dow Jones Stoxx 600 Index added 1.8 percent to 173.59, while futures on the U.S.’s Standard & Poor’s 500 Index gained 1 percent.

Stocks and Recessions

The S&P 500 began rising on average five months before recessions ended in 1975, 1982, and 1991, data compiled by the National Bureau of Economic Research and Bloomberg show.

The yen snapped two days of gains, trading at 98.38 per dollar as of 10:41 a.m. in London, from 97.26 yesterday in New York, bringing its decline this quarter to 7.8 percent.

The Nikkei fell 1.5 percent, extending its first-quarter slide to 8.5 percent before the Tankan report tomorrow that may show confidence among Japan’s large manufacturers dropped in March to the lowest level since 1975, according to a Bloomberg survey. The nation’s jobless rate climbed to 4.4 percent in February, a report showed today.

Stock indexes around the world have rebounded after the MSCI World Index suffered its worst start to a year on record as governments pumped trillions of dollars into the financial system. The U.S. government and the Federal Reserve committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year. The MSCI World Index of 23 developed countries is down 14 percent for the quarter after losing 25 percent through March 9.

‘Again Take Risks’

“I really don’t know whether we have hit the high point or the low point in terms of risk aversion,” said Axel Botte, a strategist at AXA Investment Managers in Paris, which has $800 billion in assets. “The biggest thing you need to have is people’s ability to again take risks.”

Oil rose as much as 1.7 percent to $49.24 a barrel and gold for immediate delivery climbed 0.5 percent to $920.10 an ounce. Crude is set for the biggest monthly gain since June on speculation that stimulus plans will boost the global economy. Gold is completing its best quarter in a year amid concerns that government efforts to pump cash into financial systems will lead to faster inflation.

To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net