Finance Chief Noda Prepared to Act on Currency as Yen Reaches 15-Year High
Yoshihiko Noda, Japan's finance minister
Tomohiro Ohsumi/Bloomberg
Yoshihiko Noda, Japan's finance minister.
Yoshihiko Noda, Japan's finance minister. Photographer: Tomohiro Ohsumi/Bloomberg
Sept. 7 (Bloomberg) -- Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo, talks about the outlook for the Japanese economy, central bank monetary policy, and the yen. The Bank of Japan kept borrowing costs and the size of its liquidity injections unchanged, taking a pause in monetary stimulus to monitor the yen’s moves and U.S. economic data after expanding a credit program a week earlier. Kanno also discusses Democratic Party of Japan presidential election. He talks with Mark Barton on Bloomberg Television's "Global Connection." (Source: Bloomberg)
Japanese Finance Minister Yoshihiko Noda said he is prepared to take “bold” action on currencies, including intervention in foreign-exchange markets, after the yen reached a 15-year high against the dollar.
“We will take bold action if necessary and naturally that can include intervention,” Noda told lawmakers in parliament today. “We have to use every option available as a strong yen is likely to have a severe impact on companies.”
The yen rose to 83.52 per dollar yesterday, the highest level since June 1995, as concerns about weakening growth in the U.S. and Europe bolstered the currency’s appeal as a refuge. The Bank of Japan pledged readiness to ease policy further if necessary yesterday, an indication it is willing to do its part to prevent the currency from derailing the nation’s expansion.
BOJ Governor Masaaki Shirakawa said at the same Diet hearing that the bank’s statement shows “we will implement additional measures should downside risks materialize and the economy worsen more than our outlook.”
The yen traded at 83.47 per dollar as of 3:06 p.m. in Tokyo. It has risen 11 percent this year. The Nikkei 225 Stock Average slid 2.2 percent to 9,024.60.
“We are fully aware that the yen’s gain can have a big effect on corporate confidence,” the governor said. “We will carefully examine the outlook for the economy, including the impact of foreign-exchange rates.”
Exceed Forecasts
Reports today showed Japanese machinery orders and the current-account surplus exceeded forecasts in July even as the yen appreciated. At the same time, the economy watchers index, a gauge of merchant sentiment, fell to a six-month low of 45.1 in August, a sign the currency is starting to erode confidence.
Shirakawa said investor concern about the global economy has increased the appeal for relatively safe assets and that’s one factor behind the yen’s advance.
Japan hasn’t stepped into currency markets since 2004. Noda said on Sept. 4 that it would be “difficult” to gain support for international coordination to halt the yen’s advance, an indication Japan would have to conduct intervention alone.
Opposition lawmakers questioned the governor and finance minister in the lower house of parliament and called on them to do more to address the yen’s advance. The upper house hearing will be tomorrow.
New Komeito Lawmaker Keiichi Ishii said he was disappointed that policy makers failed to understand the gravity of the yen’s threat and lacked a “sense of crisis” about how the currency may weigh on corporate activity and cause financial market volatility.
To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net; Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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