ZT: Japan Intervenes for First Time Since 2004 to Rein in Yen

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Japan Intervenes for First Time Since 2004 to Rein in Yen
By Toru Fujioka - Sep 14, 2010 10:32 PM ET Email Share
Business Exchange Twitter Delicious Digg Facebook LinkedIn Newsvine Propeller Yahoo! Buzz Print Japan intervened in the foreign- exchange market for the first time since 2004 after a surge in the yen to the strongest against the dollar in 15 years threatened to stunt the nation’s economic recovery.

Finance Minister Yoshihiko Noda confirmed the intervention, speaking to reporters today in Tokyo. He said Japan contacted other nations about the step, without specifying that today’s measure was taken unilaterally. Chief Cabinet Secretary Yoshito Sengoku said the ministry considers 82 per dollar to be the line of defense, after it reached a high of 82.88 earlier today.

Prime Minister Naoto Kan was under increasing pressure to intervene after calls by business leaders for stronger steps to arrest the yen’s gains, which erode the competitiveness of the exports that have propelled Japan’s growth. The step comes a day after he won reelection as the head of the nation’s ruling party, beating a candidate who had specifically called for intervention.

“Investors were starting to doubt the government’s commitment to its pledge that it would take bold action,” said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo. Kan and Noda in recent weeks repeatedly said that Japan was ready to take “bold” measures to stem the currency.

The yen tumbled 1.7 percent to 84.42 per dollar as of 11:23 a.m. in Tokyo, after reaching a high of 82.88 earlier today. The benchmark Nikkei 225 Stock Average climbed 1.8 percent to 9,470.31.

Ready for More

“We can’t overlook these movements that could have a negative effect on the stability of the economy and financial markets,” Noda told reporters in Tokyo. “We conducted intervention to contain excessive movements in the currency market. We will continue to watch developments in the market carefully and we will take bold actions including further intervention if necessary.”

U.S. Treasury spokeswoman Natalie Wyeth declined to comment on Japan’s announcement when reached by telephone.

Japan hadn’t intervened to sell yen in the foreign-exchange market since 2004, when the yen was around 109 per dollar. The Bank of Japan, acting on behest of the Ministry of Finance, sold 14.8 trillion yen in the first three months of 2004, after record sales of 20.4 trillion yen in 2003. Noda didn’t say how much was used in today’s action, while that figure will be released at a later date.

Shirakawa’s Take

Bank of Japan Governor Masaaki Shirakawa said in a statement that the action should “contribute to a stable foreign exchange-rate formation.”

Until now, the government has pressed the Bank of Japan to step up liquidity injections to help address the gains in the yen. The central bank last month increased a credit program by 10 trillion yen ($119 billion) after an emergency meeting. The step had little impact on the currency.

“I don’t see any other measure to address deflation and a slowing economy,” Masafumi Yamamoto, chief currency strategist at Barclays Bank Plc in Tokyo, who also used to work at the Bank of Japan, wrote in a report two days ago.

Top business executives have been calling for government action to stem the yen’s rise.

“We want verbal or actual intervention if the yen appreciates more than the current level,” Hiromasa Yonekura, head of Japan’s Keidanren business lobby, said at a Sept. 13 press conference. “Rapid change should be managed,” Hiroaki Nakanishi, president of Hitachi Ltd., said this week in Tokyo.

Coordination Need

Some analysts have said that official action by Japan might not weaken the yen for long unless it’s conducted together with overseas authorities.

Kan said last week in a debate with Ozawa that getting international cooperation to halt the yen’s rise is “difficult.”

U.S. Treasury Secretary Timothy F. Geithner declined to comment about the prospects for currency intervention in an interview last week, instead saying that Japanese officials should do what they can to help their economy grow.

“They’re working through some difficult problems,” Geithner said on Bloomberg Television. “My view is they should be focusing like we are on how to make sure they’re reinforcing recovery in Japan and doing things that are going to help.”

Recent Japanese data have pointed to the expansion losing momentum. The government yesterday revised its July industrial output figures to show that output fell rather than increased from a month earlier. Japan’s economy expanded at a 1.5 percent annual rate in the second quarter, less than half the pace of the previous period, and consumer confidence slid to a four- month low in August.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net;

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Yen Weakens as Japan Intervenes for the First Time Since 2004
By Ronnie Harui - Sep 14, 2010 10:00 PM ET Email Share
Business Exchange Twitter Delicious Digg Facebook LinkedIn Newsvine Propeller Yahoo! Buzz Print The yen fell after Japan intervened to weaken its currency for the first time since 2004.

Finance Minister Yoshihiko Noda confirmed the intervention, speaking to reporters today in Tokyo.

The yen traded at 84.09 to the dollar as of 10:58 a.m. in Tokyo. Japan’s currency was as strong as 82.88 earlier, the highest since May 1995, and closed at 83.04 in New York yesterday.

To contact the reporter on this story: Ronnie Harui in Singapore at rharui@bloomberg.net