September 15, 2010

Japan Intervenes To Weaken Yen And Warns Of More

JPY yen

Japan intervenes to weaken yen and warns of more

Japan sold yen in the market on Wednesday for the first time in six years and promised more to come in a bid to stop the currency’s relentless rise from hurting exporters and threatening a fragile economic recovery.

Fresh after victory in a party leadership contest, Japan’s Prime Minister Naoto Kan appeared to be stepping up efforts to wrench the country out of deflation by targeting yen strength, which has weighed on stock prices and corporate profits.

Estimates varied on how much Japan has spent in its first intervention in the foreign exchange market since 2003-2004, when its forked out 35 trillion yen ($409 billion).

Dealers suggested Wednesday’s intervention amounted to about 300-500 billion yen ($3.6-$6 billion), though some reports put it closer to 100 billion yen.

The U.S. dollar was boosted further after an official at Japan’s Ministry of Finance said intervention was not finished. It climbed about 3 percent on the day to more than 85.50 yen, having dropped to a 15-year low of 82.87 yen earlier.

Unlike in previous intervention, the Bank of Japan will not drain the money flowing into the economy as a result of the yen selling, sources familiar with the matter said.

That indicated the central bank plans to use the sold yen as a monetary tool to boost liquidity and support the economy.

Authorities that sell their own currencies to weaken them often issue bills to “sterilize” the funds and keep the excess money from becoming inflationary. In Japan’s case, it wants to promote inflation since the economy has been dogged with deflation for much of the past decade

The central bank may follow up with additional steps, such as buying more government debt, economists said.


Finance Minister Yoshihiko Noda, who will reportedly keep his post after a cabinet reshuffle, indicated Tokyo acted alone on the yen. He said he was in contact with authorities overseas and analysts expected Japan to be spared international criticism.

“Japan will be seen as a special case,” said Simon Flint, global head of foreign exchange research with Nomura in Singapore. “Obviously, its economy has been in significant trouble for a while, stocks have been depressed for some time, export performance relative to the Asian peer group has been very weak,” he said.

“To some degree there will be some sympathy in the rest of the world for Japan’s predicament.”

U.S. officials at the Federal Reserve and the Treasury declined immediate comment.

Analysts doubted whether Kan’s government was ready for a protracted battle with markets similar to the 15-month yen selling spree earlier this decade since that campaign prove ineffective at halting the yen’s strength for long.


Kan’s government has been trying to talk down the yen as it strengthened beyond 90 per dollar

“The government probably wanted to stamp out those views. But the question is: Will the yen stop rising from here? It’s not clear.”

USD/JPY’s recovery from around the session lows of 85.00 comes as a Japanese government official confirms the MOF/BOJ has intervened in European markets Wednesday

* Japan PM Kan: Intervened in fx because yen reached level where action was needed.

Japan’s Ministry of Finance said intervention was not finished. Japanese news agency Kyodo cited a ministry official saying Japan had intervened in European markets and will intervene in New York trading hours if need be. – Market Talk

Wednesday. September 15, 2010

UPDATE: 07:25 ET (11:25 GMT)


Naoshima: Expect BOJ to Take Further Monetary Steps To Fight Deflation

Filed under: Uncategorized — bigcapital @ 5:26 pm
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Naoshima: Expect BOJ to Take Further Monetary Steps To Fight Deflation

Japan’s Economy, Trade and Industry Minister Masayuki Naoshima said Wednesday that he expects the Bank of Japan to take further monetary steps to fight deflation shortly after the government and the central bank intervened in the currency market for the first time in more than six years, Kyodo News reported.

“In terms of stepping up cooperation between the government and the BOJ, and especially to show our strong resolve to end deflation, I expect more monetary policies from the BOJ,” Naoshima told reporters in Tokyo.

He also stressed that the market intervention was in line with the government’s policy, approved by the Cabinet on Friday, to “take decisive actions, including intervention, when necessary” to stem theY’s rise against major currencies.

“I think there was a strong impact on the market in the sense that the Japanese government made its will clear,” he added.

The policy was stipulated in the new stimulus package the government compiled to tackle the recent upsurge of theY and downside risks to Japan’s economic growth.

Asked about what the government would like the U.S. dollar-yen exchange rate to be, Naoshima said while it is difficult to tell, the assumed rate level among Japanese companies is 90Y to the dollar and the point is how “one thinks about the gap.” – Market Talk

Wednesday. September 15, 2010

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