London, April 23 (Bloomberg) -- The yen rose against the dollar for the fourth day in five, onspeculation Junichiro Koizumi will become Japan's next prime minister and adopt policiesthat will revive the economy. The yen rose to 121.81 per dollar from 122.56 Friday. Earlier, it rose as high as 121.40. It'sfallen 6.1 percent against the U.S. currency this year. Against the euro, the yen rose to109.74 from 110.84. Koizumi has said he wants to limit government bond sales to 30 trillion yen ($245 billion) ayear and sell the nation's postal savings system, freeing up money to be invested inprofitable companies. That's a break from the borrow-and-spend policies of the past decadethat have left Japan with the world's biggest debt. The market has taken the possible election of Koizumi as ``yen positive,'' said SimonHayley, a currency strategist for IDEA Global. Still, ``there's a long-term question mark overwhether he has a coherent policy.'' The yen probably won't break through 120 anytime soon because Ministry of Financeofficials don't want the currency to strengthen too much, Hayley said. Koizumi won 123 of the 141 votes available in the prefectural primaries, said Kyodo News,citing its own count. Ryutaro Hashimoto, who had been favored to succeed outgoing PrimeMinister Yoshiro Mori, won just 15 primary votes. That gives Koizumi the edge heading into tomorrow's ballot, when the party's 346parliamentarians vote. He needs 121 more votes to secure the job in his third attempt.
Brighter Prospect
``Markets will take a wait and see'' approach on any policy changes, said Ian Gunner, acurrency strategist at ABN Amro. Still, ``any alternative to Mori, who's been a disaster,could mean there's some light at the end of the tunnel.'' Ten years of deficit spending and low interest rates have done little to revive the economy --growth is expected to slow to 0.9 percent this year, according to the latest BloombergNews survey. That's after 1.7 percent last year, the fastest rate since 1997. In the past decade, the government has run up a debt that it forecasts will reach 666 trillionyen, or 130 percent of gross domestic product, by March next year. ``Japan's economic problems are so deep-seated it won't be easy to restructure theeconomy,'' said Stefan Schilbe, an economist at HSBC Trinkaus in Dusseldorf. It's unlikelythe yen will rise above 120 soon, he said. The euro, after rising for three days against the dollar, weakened to 90.15 U.S. cents from90.42 after reports showed German business confidence fell more than expected in Marchand Italian inflation accelerated faster than expected in April.
Dilemma for ECB
The Ifo institute's index, Germany's most widely watched gauge of executive confidence,fell more than expected to 93.9 from 94.9 in February. That's the ninth time the index hasdropped in 10 months. Economists had expected a decline to 94.2. In Italy, price data from 12 cities rose 0.4 percent in April and 3.1 percent from a yearearlier, analysts estimated. The annual rate exceeded the 2 percent ceiling set by theEuropean Central Bank for the 17th consecutive month. The Italian report may make it harder for the ECB to follow the U.S. Federal Reserve intrimming borrowing costs as a stimulus to economic growth. ``Today's data isn't constructive for the euro,'' said Mark Henry, a currency strategist at GNILtd. European Central Bank President Wim Duisenberg said Saturday Europe won't be hurtmuch by slowing growth in the U.S., suggesting the bank will hold the benchmark ratesteady when policy makers meet on Thursday.
Growth Outlook
The International Monetary Fund will say it expects the world's largest economy to expand1.5 percent this year, said an EU official at the meeting of finance ministers in Sweden,who couldn't be identified under briefing rules. The IMF expects the euro zone to grow 2.4percent in 2001, the official said, below the EU's own forecast of between 2.5 percent and 3percent. The European Commission is likely to reduce its forecast for 2001 economic growth in theeuro region to 2.7 percent from 3.2 percent, Italian daily Il Sole/24 Ore reported, withoutciting sources. Still, the downgrades shouldn't drag on the single currency as growth in the euro zone isstill faster than U.S. growth, said Nick Parsons, global head of currency research atCommerzbank AG. The euro zone economy ``is dull, but dullness will be rewarded,'' said Parsons. The euroregion will expand by about 2.5 percent this year, compared to 1.8 percent in the U.S, hesaid. The euro rose earlier as a U.S. rate cut last week, the fourth this year, raised speculationinvestors may be lured to higher yields in Europe, analysts said. The Federal Reserve lowered its target interest rate on overnight loans between banks lastweek to 4.5 percent. That's below the euro-zone's rate of 4.75 percent for the first timesince the inception of the single currency in January 1999.