The Japanese yen recorded its steepest decline in two years, reaching 81 against the U.S. dollar overnight and 87.1 when pitted with the consistently surging Australia currency.

Economists credited the yen's dip, deemed crucial to Japan's economic turnaround, to arresting deflation levels that the nation's Finance Ministry said would stabilise starting the first quarter of 2012.

According to Bloomberg, the country's central bank, the Bank of Japan (BOJ) has announced its intent to post inflation level of at least one percent in February, picking up on that number through the remaining years of the current decade.

Hopefully the ploy, the BOJ said, would inject some $115 billion to the domestic economy, its earlier contraction further worsened by the strings of natural disasters - a titanic quake, tsunami waves and near-nuclear meltdown - that hit the country March last year.

Japan's economic managers were looking for higher inflation numbers that could further push down the yen and allow the country to recover some of its export muscles that were lost through the years.

There was a time that Japan was the export leader of the world, when majority of consumer electronics and vehicles were shipped out from the country to rest of the world, but that distinction is now enjoyed by China, which last year also edged out Japan as the second biggest economy in the world.

And BOJ governor Masaaki Shirakawa is tasked to further pull down the value of yen, Bloomberg said, which is a job he believes will be made easier by allowing consumer prices to shoot up a bit.

A lower yen should make anew Japanese products more competitive and its impact on the export sector could jumpstart the elusive turnaround that Japan has been looking for.

So far, analysts view Japan's existing policies as serious enough to encourage recovery, the first of which to be realised is for the yen to remain low following its record 125 against the U.S. dollar just before the onset of the global financial crisis in 2007.

Bloomberg, citing median analysts' take, has predicted for yen to reach 77 by the end of March while HSBC suggested that the Japanese currency may settle down at 84 against the U.S. dollar by yearend, with UBS looking at 80.

But BOJ's goal may prove daunting as analysts noted that amidst its successive retreats, the Japanese yen still carries a relatively higher value when compared to its average level over the past five years.

"A plunge in the yen is intriguing as a tale, but I am sceptical that it will actually come about," Yunosuke Ikeda of Nomura Securities Co told Bloomberg.

He added though that so "long as Japan maintains its current-account surplus, funds will accumulate inside the country and be invested in government bonds via bank deposits."

On that account, Japan could rest a bit as the Finance Ministry has reported that by the end of 2010, it recorded a surplus of 251.5 trillion yen though the Trade Ministry quickly added that the level could shrink midway through the decade and post a deficit in the process.