Japan may finally act on strong yen
By Tomoko A. Hosaka |
August 26, 2010, Thursday
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Print Edition
Print Edition
FACING a surging yen and mounting calls for action, Japan may finally decide that it can't afford to let its currency keep climbing.
Yesterday brought growing expectations that Japan's monetary authorities would do something to stem the yen's rise after it hit a fresh 15-year high against the dollar the day before. New government figures showed the country's export growth slowed in July, in large part on the strong yen.
Weaker shipments of consumer electronics, autos and other goods pose a major risk for Japan's export-driven recovery. With lackluster demand at home, the country has depended on high-growth countries like China to fuel the economy.
That expansion is now waning just as exporters face a new onslaught from the yen, which traded below 84 to the dollar this week. It weakened slightly yesterday amid speculation that Japan might intervene in the currency market for the first time since March 2004 to stem the rise.
But hopes for a quick counterpunch fizzled yesterday afternoon after Japanese leaders emerged from an emergency meeting with few hints of an immediate response. Finance Minister Yoshihiko Noda said he did not discuss specific yen-targeted measures during the meeting with Prime Minister Naoto Kan.
Disappointed investors sent the Nikkei 225 stock index tumbling 1.7 percent to a new 16-month low of 8,845.39.
Earlier yesterday, Noda said that the government must respond with "appropriate steps" when necessary.
A rising yen is toxic for exporters like Toyota Motor Corp and Sony Corp because it shrinks the value of repatriated profits and makes their products less competitive overseas.
Comments after the meeting suggest that the earliest action could come from the central bank when it meets on September 6 for a two-day policy board meeting.
Under growing political pressure, the Bank of Japan is expected to ease monetary policy to try to weaken the yen. Analysts say the central bank will most likely decide to boost liquidity by expanding a short-term low-interest loan program for financial institutions.
"The BOJ doesn't want to do anything," said Christian Carrillo, head of Asia fixed-income strategy at Societe Generale in Tokyo. "It's really being dragged kicking and screaming to try to do something."
The finance ministry's latest data showed the export value in July rose 23.5 percent from a year ago to 5.98 trillion yen (US$71 billion). Exports had risen 27.7 percent in June and 32.1 percent in May.
Yesterday brought growing expectations that Japan's monetary authorities would do something to stem the yen's rise after it hit a fresh 15-year high against the dollar the day before. New government figures showed the country's export growth slowed in July, in large part on the strong yen.
Weaker shipments of consumer electronics, autos and other goods pose a major risk for Japan's export-driven recovery. With lackluster demand at home, the country has depended on high-growth countries like China to fuel the economy.
That expansion is now waning just as exporters face a new onslaught from the yen, which traded below 84 to the dollar this week. It weakened slightly yesterday amid speculation that Japan might intervene in the currency market for the first time since March 2004 to stem the rise.
But hopes for a quick counterpunch fizzled yesterday afternoon after Japanese leaders emerged from an emergency meeting with few hints of an immediate response. Finance Minister Yoshihiko Noda said he did not discuss specific yen-targeted measures during the meeting with Prime Minister Naoto Kan.
Disappointed investors sent the Nikkei 225 stock index tumbling 1.7 percent to a new 16-month low of 8,845.39.
Earlier yesterday, Noda said that the government must respond with "appropriate steps" when necessary.
A rising yen is toxic for exporters like Toyota Motor Corp and Sony Corp because it shrinks the value of repatriated profits and makes their products less competitive overseas.
Comments after the meeting suggest that the earliest action could come from the central bank when it meets on September 6 for a two-day policy board meeting.
Under growing political pressure, the Bank of Japan is expected to ease monetary policy to try to weaken the yen. Analysts say the central bank will most likely decide to boost liquidity by expanding a short-term low-interest loan program for financial institutions.
"The BOJ doesn't want to do anything," said Christian Carrillo, head of Asia fixed-income strategy at Societe Generale in Tokyo. "It's really being dragged kicking and screaming to try to do something."
The finance ministry's latest data showed the export value in July rose 23.5 percent from a year ago to 5.98 trillion yen (US$71 billion). Exports had risen 27.7 percent in June and 32.1 percent in May.
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