Japanese loans plan to ease firm yen
Source: Agencies |
August 25, 2011, Thursday
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Print Edition
Print Edition
JAPAN'S government yesterday unveiled a US$100 billion loans program to ease the strains of a strong yen and encourage companies to turn adversity into opportunity.
The unconventional one-year scheme aims to prompt Japanese companies to shift their yen holdings into foreign currencies and spur overseas mergers and acquisitions. It came coupled with a new rule requiring major financial firms to report their currency trading positions through the end of September.
The emergency steps represent the latest attempt by the government to wrestle with a Japanese currency that it fears is undermining the country's export-driven economy and recovery from the March 11 earthquake and tsunami.
"I hope this will help to address the one-sided strength of the yen," Finance Minister Yoshihiko Noda told reporters, according to Kyodo News agency.
A strong yen erodes the value of exporters' profits when brought back to Japan and pushes up prices of their goods overseas. Officials also worry about job losses at home as companies move production out of Japan to insulate themselves from the rising yen.
The finance ministry intervened in currency markets earlier this month as the yen flirted with record highs against the dollar. The impact proved to be short-lived. Last week the dollar fell under 76 yen, which was a new post-World War II high for the Japanese currency.
Through the program, the government will send foreign currency reserves to the Japan Bank for International Cooperation. The state-operated bank, known as JBIC, would then extend loans to commercial banks so they can help companies with overseas investments and secure natural resources.
The unconventional one-year scheme aims to prompt Japanese companies to shift their yen holdings into foreign currencies and spur overseas mergers and acquisitions. It came coupled with a new rule requiring major financial firms to report their currency trading positions through the end of September.
The emergency steps represent the latest attempt by the government to wrestle with a Japanese currency that it fears is undermining the country's export-driven economy and recovery from the March 11 earthquake and tsunami.
"I hope this will help to address the one-sided strength of the yen," Finance Minister Yoshihiko Noda told reporters, according to Kyodo News agency.
A strong yen erodes the value of exporters' profits when brought back to Japan and pushes up prices of their goods overseas. Officials also worry about job losses at home as companies move production out of Japan to insulate themselves from the rising yen.
The finance ministry intervened in currency markets earlier this month as the yen flirted with record highs against the dollar. The impact proved to be short-lived. Last week the dollar fell under 76 yen, which was a new post-World War II high for the Japanese currency.
Through the program, the government will send foreign currency reserves to the Japan Bank for International Cooperation. The state-operated bank, known as JBIC, would then extend loans to commercial banks so they can help companies with overseas investments and secure natural resources.
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