Top politicians now prepared to intervene on yen's climb
By Stanley White |
September 9, 2010, Thursday
|
Print Edition
Print Edition
JAPAN'S finance minister acknowledged currency intervention is an option for the first time since the yen's 14 percent rise, and a candidate to become prime minister sanctioned solo intervention as the yen jumped to a 15-year high versus the dollar.
Finance Minister Yoshihiko Noda sharpened his rhetoric on foreign exchange yesterday as a rise in the yen, since May, underlined concerns the currency's strength could hurt exports, raised deflationary pressures and therefore derail a fragile economic recovery.
Political powerbroker Ichiro Ozawa, who is challenging Prime Minister Naoto Kan in a close-fought ruling party leadership race, later said Japan should take all possible steps to counter the rising currency including market intervention, even if solo action is ineffective.
Investors initially ignored Noda's comments and pushed the yen to a 15-year high of 83.34 yen per dollar, doubting that Japan would risk going solo and all but ruling out coordinated intervention with other Group of Seven countries.
The yen later gave back some of its gains.
A report showing Japanese machinery orders rose by the most in seven months in July did little to ease concern that a surging yen could undermine the country's important export sector, seen as critical to the recovery from the global economic crisis.
The Bank of Japan has indicated it is willing to ease monetary policy to help the economy, but is likely to bide its time until the ruling party settles a leadership contest with a vote on Tuesday.
As the yen surged, the Nikkei average fell 2.2 percent to its lowest close in a week.
Japanese officials have been trying to talk down the yen but so far their comments have had little effect as it keeps rising due to concerns about a slowdown in the global economy and the health of the European banking system.
"Basically, it is important to closely communicate with the international community, and we are currently making efforts on this," Noda told lawmakers in parliament.
"In the end, we will take decisive measures including intervention when needed."
The remarks indicated a shift in Noda's language. Previously he has repeatedly declined to comment on intervention when asked about it.
Meanwhile Ozawa told reporters Japan should intervene and sell the yen even if solo action was likely to be ineffective. He said last week Japan should be prepared to act on currencies.
"They are trying to talk as much as they can, but we think actual intervention is unlikely because other G7 countries wouldn't cooperate," said Thomas Harr, head of Asian foreign exchange strategy at Standard Chartered in Singapore.
Finance Minister Yoshihiko Noda sharpened his rhetoric on foreign exchange yesterday as a rise in the yen, since May, underlined concerns the currency's strength could hurt exports, raised deflationary pressures and therefore derail a fragile economic recovery.
Political powerbroker Ichiro Ozawa, who is challenging Prime Minister Naoto Kan in a close-fought ruling party leadership race, later said Japan should take all possible steps to counter the rising currency including market intervention, even if solo action is ineffective.
Investors initially ignored Noda's comments and pushed the yen to a 15-year high of 83.34 yen per dollar, doubting that Japan would risk going solo and all but ruling out coordinated intervention with other Group of Seven countries.
The yen later gave back some of its gains.
A report showing Japanese machinery orders rose by the most in seven months in July did little to ease concern that a surging yen could undermine the country's important export sector, seen as critical to the recovery from the global economic crisis.
The Bank of Japan has indicated it is willing to ease monetary policy to help the economy, but is likely to bide its time until the ruling party settles a leadership contest with a vote on Tuesday.
As the yen surged, the Nikkei average fell 2.2 percent to its lowest close in a week.
Japanese officials have been trying to talk down the yen but so far their comments have had little effect as it keeps rising due to concerns about a slowdown in the global economy and the health of the European banking system.
"Basically, it is important to closely communicate with the international community, and we are currently making efforts on this," Noda told lawmakers in parliament.
"In the end, we will take decisive measures including intervention when needed."
The remarks indicated a shift in Noda's language. Previously he has repeatedly declined to comment on intervention when asked about it.
Meanwhile Ozawa told reporters Japan should intervene and sell the yen even if solo action was likely to be ineffective. He said last week Japan should be prepared to act on currencies.
"They are trying to talk as much as they can, but we think actual intervention is unlikely because other G7 countries wouldn't cooperate," said Thomas Harr, head of Asian foreign exchange strategy at Standard Chartered in Singapore.
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