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Forex

M&A activity, Japanese investment abroad seen weakening yen

TOKYO -- Overseas investors have driven the yen's slide since the second half of 2012, but Japanese businesses and individuals are increasingly taking over that role by selling the currency through acquisitions of foreign businesses and other investment abroad.

     Reports surfaced Monday that Dai-ichi Life Insurance is planning to acquire American life insurer Protective Life. This helped send the yen to the mid-102 level against the dollar, a roughly one-month low.

     "This really left the impression that Japanese companies are still eager to expand overseas," said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

     The acquisition price is estimated at more than 500 billion yen ($4.8 billion), and Dai-ichi Life is reportedly considering a public issuance of some 200 billion yen of new shares. That amounts to a substantial sale of yen just on its own if the funds are put into the purchase.

     According to the Finance Ministry, Japanese corporations conducted roughly 2.6 trillion yen in direct overseas investment, including M&A deals, during the January-March quarter. Although direct overseas investment has been shrinking lately due to a weaker yen, Nomura Securities chief foreign exchange strategist Yunosuke Ikeda predicts that investment will remain robust at around 10 trillion yen this fiscal year.

     Retail investors are also expected to step up selling of the yen as the government moves to expand tax-free savings accounts, or NISAs. As individuals buy investment trusts, their money will flow to foreign-currency-denominated products, including overseas stocks and bonds.

(Nikkei)

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