Japanese Finance Minister Sada-kazu Tanigaki said the government will take "decisive action" to stem an "irregular" rise in the yen, suggesting authorities will keep selling the currency to protect exporters.
"If the currency market makes irregular moves, we need to take decisive action," Tanigaki said in an interview. ``It is an internationally acceptable response.''
Tanigaki's remarks come as the yen trades near its highest level against the dollar since November 2000. Its rise may derail Japan's economic recovery by making the country's exports, which accounted for a fifth of economic growth in the second quarter, more expensive.
The Japanese currency has gained 7 percent against the dollar this year, reaching ¥110.12 against the dollar on Tuesday, a 33-month high. The dollar bought ¥110.93 at 5pm in New York on Friday.
Demand for the yen has increased on signs that Japan's economic recovery is gathering momentum and as the stock market rebounds from a 20-year low in April. The Bank of Japan's quarterly Tankan survey last week showed business sentiment last month rose to the highest level in two-and-a-half years. Since March 31, the Nikkei 225 index is up 34 percent.
The Group of Seven industrialized nations on Sept. 20 issued a statement many analysts said implicitly called for a weaker dollar.
The statement urged less government manipulation of exchange rates.
Japan's central bank sold its currency Tuesday through the Federal Reserve Bank of New York, adding to a record ¥4.46 trillion (US$40.2 billion) of sales from Aug. 28 to Sept. 26. This year Japan has sold a total of ¥13.5 trillion.
Canadian Finance Minister John Manley said earlier this week that he's disappointed in Japan's efforts to fight the yen's rise after the Group of Seven statement.
"I don't think it's a desirable policy," Manley said in an interview. "If we don't see adequate adjustment of Asian currencies, we and perhaps the euro and the Australian dollar are going to take the brunt of adjustment in exchange rates, which isn't quite fair."
Yesterday Kazumasa Iwata, one of the Bank of Japan's two deputy governors, said the yen's rapid rise may "put exporters in trouble," on a Tokyo Broadcasting System, Inc satellite television program.
Nintendo, the world's biggest maker of hand-held game players, said Friday it probably had a ¥3 billion net loss in its fiscal first half, because of the stronger-than-expected currency and slower sales of its GameCube game console.
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