USD/JPY monthly
USD/JPY is just 2 yen away from a 13-year high. IBTimes UK/FXStreet

The Japanese currency has plummeted against the US dollar and hit a fresh multi-year low as Dallas Fed President Richard Fisher said the US should start raising interest rates soon.

The USD/JPY soared to 122.04, its highest since July 2007, and from the previous close of 121.15. The pair is close to a 13-year high as the break of 124.175 will achieve that milestone.

In other words, the four-year rally in the Japanese yen that took the pair down to a multi-year low of 76.05 in November 2011 has now been entirely reversed.

Following Fisher's remarks, the EUR/USD dropped to a 12-year low of 1.0734, its lowest since early 2003, from the previous close of 1.0851, sending the USD index to a 12-year high of 98.49.

Data of late from Japan has been largely mixed with the leading economic index and services PMI declining and the fourth quarter GDP figures coming in better than expected.

The world's third largest economy expanded 0.4% on a sequential basis in the three months to December after two quarters of contraction.

Japan's trade deficit widened to ¥864.2bn ($7.09bn) in January from ¥395.6bn recorded for the previous month.

The yen has been keeping its downward trend over the past few days and the dovish comments by the deputy governor of the Bank of Japan only helped yen selling.

Oil price fall impact

The central bank must ease monetary policy further if oil price falls hamper its efforts to ramp up inflation expectations, its deputy head Hiroshi Nakaso said.

Nakaso also said oil price falls alone will not immediately lead to further action because the BoJ is focusing on whether inflation is accelerating as a trend backed by a solid economic recovery, according to a Reuters report.

"Oil price falls may push down prices in the short-term but will accelerate inflation in the somewhat long-term perspective because they benefit an oil-importing economy like Japan," Nakaso said.