Global Biz
Japan PM says ready to step into forex markets again
(Agencies)
Updated: 2010-09-16 16:16
 |
Large Medium Small |
TOKYO - Japan's prime minister signalled on Thursday authorities would keep intervening to curb yen strength as sagging manufacturing confidence underscored the threat the currency poses to the fragile economic recovery.
A Reuters monthly poll that tracks the Bank of Japan tankan report showed manufacturing confidence dropped in September from August for the first time in nearly a year as companies struggled with the yen's rise to a 15-year high against the dollar.
Prime Minister Naoto Kan, who fended off a leadership challenge from a ruling party powerbroker this week, pointed on Thursday to more yen selling if needed.
"If rapid fluctuations in the yen harm Japanese firms' appetite for investing at home and push them to shift their factories overseas, that could further worsen job conditions and affect (our efforts) to overcome deflation," Kan said.
"I will take decisive steps if needed from now on as well," he told a business group.
Pressure on BOJ?
Kan, struggling to unify his party and facing a divided parliament, wants to be proactive in tackling the yen after winning the ruling party leadership race on Tuesday.
He is expected to reshuffle his cabinet soon but retain Yoshihiko Noda as finance minister.
"He (Kan) is trying to send a message of his party's solidarity. He is showing the strong intention of Japan to take decisive action through intervention," said Ayako Sera, market strategist at Sumitomo Trust & Banking.
A panel of junior lawmakers in the ruling Democratic Party of Japan (DPJ) urged the Bank of Japan to call an extraordinary meeting to ease policy and so support the government's efforts.
Central bank sources have said the authority has no plan to call an emergency meeting but it is ready to act at its next scheduled meeting in early October if the economic recovery remains under threat.
The panel suggested the BOJ increases its buying of Japanese government bonds, although BOJ Governor Masaaki Shirakawa reiterated his opposition to the idea.
"We hardly observe the fact that massive expansions in central bank balance sheets result in an increase in inflation in advanced economies," Shirakawa said in a speech at a conference.
Yen threat to exports
The intervention pushed the dollar more than 3 percent higher on Wednesday, a big move for a currency.
Japan faced some international criticism for its solo intervention. Since most advanced economies are grappling with slow growth at home, making exports an economic imperative, Japan's move heightened concerns countries would launch a round of competitive devaluations to support their own exports.
But Kan faces domestic pressure for more action on the yen.
"The dollar has recovered to about 85 yen now after the government and Bank of Japan intervened yesterday, and we want them to continue taking strong action to reverse the yen's strength," Toshiyuki Shiga, chairman of the Japan Automobile Manufacturers Association (JAMA), told a news conference.
"A dollar of 85 or 90 yen is not a level at which job losses can be prevented in Japan," he added.
Japan's economic recovery from the global crisis has faltered in recent months with export growth slowing down. Signs the US recovery is also stuttering has added to Tokyo's concerns over the yen's strength.
Underlining those concerns, the Reuters Tankan survey, which has a 95 percent correlation with the BOJ's closely watched quarterly tankan business sentiment survey, showed the manufacturers' sentiment index fell 5 points from August to plus 17, down for the first time since October 2009.
Still, the Reuters index has risen during the July-September quarter, suggesting the BOJ measure due on out on September 29 will also show a rise.