Japan stepped into the currency markets yesterday for the first time since 2004 in a bid to stem the yen’s appreciation against the US dollar and safeguard a faltering recovery.
The move came a day after Japanese Prime Minister Naoto Kan reaffirmed his leadership in a ruling party election victory that saw off a candidate outspoken in his calls for intervention.
The yen fell to an intraday low of ¥85.13 to the US dollar following the yen-selling intervention, which was triggered by the Japanese unit’s earlier surge to a fresh 15-year high of ¥82.86.
The euro strengthened to ¥110.32 from ¥107.75.
“We conducted a market intervention,” Japanese Finance Minister Yoshihiko Noda told reporters. “We will continue to monitor the movement of the market and take determined steps, including intervention, when necessary.”
Japanese shares strongly rebounded yesterday after the government intervened in the forex markets. The Nikkei index gained 2.34 percent or 217.25 points to 9,516.56. The Topix index of all first section shares added 1.65 percent or 13.77 points to 848.64.
After weeks of trying in vain to talk the yen lower through verbal warnings, the government’s tone had hardened ahead of yesterday’s decision. The yen’s appreciation has put many Japanese exporters at a disadvantage against foreign rivals as it erodes their repatriated earnings and competitiveness.
Noda said the move was made unilaterally, but added Japan had been in touch with foreign governments amid qualms from the likes of Europe and the US that exchange rates should be kept free-floating.
There was no immediate comment from the US Treasury.
“Our country’s economy is still in a very severe situation with continued deflation,” Noda said.
The yen’s rapid appreciation “harms the stability of the economy and finances. We cannot tolerate it,” he said.
Noda did not reveal the size of the intervention but Dow Jones Newswires cited traders as saying the Japanese Ministry of Finance had initially sold between ¥200 billion and ¥300 billion.
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