The slumping yen has sunk to a four-year low against the U.S. dollar, sparking renewed fears of an international push back against the Bank of Japan's aggressive easy-money policies.
The U.S. dollar shot past the psychological 100-yen mark in trading on Thursday, capping a 15-per-cent surge in the greenback so far this year.
"There is nothing magical about the 100-yen mark," pointed out Mark Chandler, head of Canadian foreign exchange strategy at RBC Dominion Securities. "But because it's an important headline number, there may be added pressure exerted on Japan."
The Bank of Japan unveiled a plan in early April to kick start its sluggish domestic economy with unconventional monetary easing.
The central bank's move accelerated the downward pressure on the yen. That's a boon for Japanese exporters, but it poses a serious a competitive threat to many of its trading partners, whose own currencies are forced higher as a result.
"The more this [fall in the yen] continues, the more the patience will draw thin," Mr. Chandler said. "Until now, I've been surprised at the lack of push back."
Both South Korea and Australia cut interest rates this week, following similar rate cuts last week by the European and Polish central banks. Earlier this week, New Zealand's central bank confirmed that it had intervened to keep the country's currency from surging higher.
"This is an escalation of the currency wars," Sebastien Galy, a currency strategist at Société Générale in New York, said in a research note.
"One country's depreciating currency translates into another country's appreciating currency."
Mr. Galy pointed out that many heavily trade-reliant countries will have no choice but to use their currencies as "an alternative policy instrument."
Rising currency tension could come up in talks as Group of Seven finance ministers and central bank chiefs gather in London on Friday and Saturday to lay the groundwork for next month's leaders' summit.
In Japan, the lower yen is already having a positive effect on corporate profits. Tokyo-based electronics and entertainment giant Sony Corp. posted its first annual profit in five years on Thursday, a turnover made possible by the lower yen.
Sony isn't alone. The weaker yen has triggered a run-up in Japan's Nikkei stock index as investors anticipate a profit boost from increased exports.
"The Nikkei has surged because Japan is still a very export-oriented economy and a lot of the major corporations are very dependent on the lower yen," said Toronto-Dominion Bank economist Francis Fong. "So it will boost earnings."
The lower yen isn't all good for Japan: It has also forced up the cost of imported oil, which the country desperately needs to generate electricity now that many of its nuclear power plants are shuttered.
But the currency story is as much "a reflection of what's going on in the United States," as it is about Japan, Mr. Fong noted.
He said TD doesn't expect the U.S. Federal Reserve to do more so-called quantitative easing in the near term, and might have to start cutting back on what it is doing now as the U.S. economy gathers steam in the second half of this year. That, he suggested, would push the U.S. dollar higher, and accelerate the yen's downward spiral.
The spark for dollar surge Thursday was a better-than-expected U.S. jobless claims report, analysts said. The number of Americans filing for jobless benefits fell by 4,000 to a seasonally adjusted 323,000 in the week ended May 4, according to the Labour Department.
Some analysts expect the dollar to hit 110 yen this year.