Forex Flash: Yen above 100.00 - the yen weakened in 2007 to a rate of more than ¥120/$ - Bank of America-Merrill Lynch

FXstreet.com (London) - Masayuki Kichikawa, writing for Global Economic Weekly at Bank of America-Merrill Lynch said Yen’s overvaluation probably weakened deflationary pressure through a rise, or a narrowing of declines, in goods prices. He writes that during this period, hourly wages basically stopped declining and service prices rose slightly. But saying before the trend could take hold, the global financial crisis flared up, the economy worsened and the yen strengthened.
Explaining that this triple whammy resulted in another swing back to deflation.

He went on to say, ‘ This time the transition from deflation to inflation is likely to proceed as follows. The yen’s 20% depreciation under the Bank of Japan’s qualitative and quantitative easing should lead to a narrower decline in goods prices through changes in export and import prices. This process may have already started; mid-April data for the Tokyo-area CPI, which have already come
out, show a narrowing decline.’