Japanese Prime Minister Yukio Hatoyama yesterday made a rare call for “firm steps” to be taken to stem the strength of the yen as the currency’s recent advances have hit exporters’ earnings.
Hatoyama told a parliamentary session that the yen’s current high value gives a misleading impression of the world’s second-largest economy, saying: “Japan’s economy and industries are not necessarily strong.”
“I think we need to take firm steps against such a strong yen,” he said, adding that there is a need for “political cooperation on the world stage.”
Hatoyama’s comments appear to mark a change from his position in January when he said that in principal the government should not discuss foreign exchange, which at the time contradicted calls by Finance Minister Naoto Kan for possible intervention. The yen surged to a 14-year high against the greenback in November, hitting ¥86.28 to the US dollar at one point. A strong yen hurts the competitiveness of Japanese exporters and erodes their overseas earnings when they are repatriated.
Since the start of the year the yen has traded around the ¥90 level against the dollar and about ¥130 to the euro.
Japan has not intervened in foreign exchange markets since March 2004, preferring instead to allow the yen to find its own level. The finance ministry can intervene by ordering the Bank of Japan (BOJ) to carry out monetary operations.
Hatoyama’s remarks came as the government is pressuring the BOJ to take stronger action to boost the economy and tackle a deflationary trend similar to the one that plagued Japan after the burst of an economic bubble in the early 1990s.
BOJ Governor Masaaki Shirakawa told lawmakers yesterday that the bank was “trying to stimulate demand by keeping interest rates low,” Dow Jones Newswire said.
His comment came amid speculation the bank will take fresh steps to ease credit at a two-day monetary policy meeting on Tuesday.
The Nikkei business daily reported yesterday that the bank aims to double cash injections into the market to ¥20 trillion (US$220 billion) and extend a loan facility program launched in December.
Last week the paper reported that the BOJ was considering a ¥10 trillion injection. By flooding financial markets with cash, the bank plans to keep short-term lending rates low in a bid to attract new borrowers.
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