Home / World Business
Tue, Aug 24, 2010 - Page 10 News List

Japanese PM, BOJ chief discuss yen

DISAPPOINTMENTExpecting some kind of strong policy response, markets were let down when the government said there was no discussion of currency intervention


Japanese Prime Minister Naoto Kan and Bank of Japan (BOJ) Governor Masaaki Shirakawa discussed the yen and agreed to work closely in a telephone conversation yesterday, but Kan did not ask the central bank to ease monetary policy further.

The government’s chief spokesman said the two did not touch on currency intervention either, disappointing markets which had expected a bolder policy response or even a signal of one after the yen’s surge to 15-year highs ­earlier this month.

“There is a sense of disappointment and it is in doubt whether anything was decided,” said Hideki Hayashi, global economist at Mizuho Securities’ fixed income research department.

Bond yields have fallen and the yen has pared gains in recent sessions on speculation the BOJ may try to pre-empt government pressure for action and further loosen its already ultra-easy policy at an emergency meeting before or shortly after the talks between Shirakawa and Kan.

“They exchanged views on the economic and financial situation including foreign exchange,” Japanese Chief Cabinet Secretary Yoshito Sengoku told a news conference. “They agreed that it was important for the government and the BOJ to ­communicate closely with each other.”

Sengoku said the government wanted to consider whether Kan and Shirakawa should meet in person, although he did not give a time frame.

Kan did not make any request on monetary policy to the central bank chief, a BOJ source said.

The US dollar edged down to ¥85.30 after Sengoku’s comments, partly on disappointment that no firm ­commitment to monetary easing came out of the talks.

Sources had said that Kan and Shirakawa might meet yesterday to craft a response to the surging yen, which is trading around at its highest level against the dollar since 1995, threatening to dent Japan’s export-reliant economy.

However, sources say the BOJ is unlikely to act before its next regular policy meeting on Sept. 6 and Sept. 7 unless the yen heads toward its all-time high past ¥80 to the dollar at a pace of ¥2 to ¥3 per day.

Hayashi said the chat was also part political performance ahead of a Sept. 14 ruling Democratic Party of Japan (DPJ) leadership vote, in which Kan could face a challenge from party ­powerbroker Ichiro Ozawa, or a proxy candidate.

Growth in Japan’s economy slowed to a crawl in the second quarter and analysts see more weakness ahead as the US recovery sputters.

The government is trying to compile a package of measures by early next month to support the economy, which may include extending the deadline for subsidies on energy-efficient electronics and homes to encourage more consumer spending.

A senior DPJ official said the ruling party hoped to compile proposals on the package by Thursday, which will be reflected in the government’s stimulus plan.

This story has been viewed 1580 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top