Yen Falls Toward Worst Quarter Since 2001 as Production Plunges

March 30 (Bloomberg) -- The yen declined, poised for the worst quarter versus the dollar since 2001, after a government report today showed Japan’s industrial production shrank for a fifth month.

Demand for the Japanese currency also waned before the Bank of Japan’s Tankan survey on April 1 that may indicate sentiment among the nation’s largest manufacturers slumped to the lowest level in more than 30 years. The euro traded near the lowest in almost two weeks against the dollar on speculation the European Central Bank will this week cut interest rates to the least since the introduction of the 16-nation currency in 1999.

“It’s a good opportunity to sell the Japanese yen,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, a unit of France’s Credit Agricole SA. “In Japan there’s a consistent flow of bad numbers relative to the U.S., so the recovery of Japan may be more delayed, which will lead to more strengthening of the dollar against the yen.”

The yen weakened to 98.11 per dollar as of 8:51 a.m. in Tokyo from 97.86 in New York on March 27. It has fallen 8.6 percent this quarter, the largest decline since a 9.2 percent drop in December 2001. Japan’s currency was at 130.12 per euro from 130.04 last week. The European currency traded at $1.3262 from $1.3287.

Japan’s yen fell against 11 of the 16 major currencies after the trade ministry said industrial production fell 9.4 percent in February, more than the 9.1 percent decline forecast by economists.

The Tankan index slid to minus 55 this quarter from minus 24 in December, according to a Bloomberg survey before the April 1 data. That would be the lowest since 1975 and the biggest drop since the bank started the survey. A negative number means pessimists outnumber optimists.

The euro may fall for a third day against the dollar as investors increased bets the ECB will cut interest rates on April 2. The yield on the three-month Euribor interest-rate futures contract due June declined to 1.3 percent on March 27, the lowest level since at least December 1998, according to data compiled by Bloomberg.