Japanese yen rise draws concern

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Last updated at: (Beijing Time) Monday, September 29, 2003

Japanese yen rise draws concern

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Japan is prepared to act against any "irregular movement" of the yen, Japanese Finance Minister Sadakazu Tanigaki said, signaling the world's second-biggest economy may sell yen to stem what it sees as the currency's excessive rise.

"The right of a nation to intervene in currency markets is internationally recognized," Tanigaki, who replaced Masajuro Shiokawa as finance minister earlier this month, said on Asahi Television's "Sunday Project" talk show.

"Yen moves since the Group of Seven meeting are a cause of some concern," he said.

Japan's currency rose to a 33-month high of 110.90 on Tuesday, after the Group of Seven nations called for more flexible exchange rates, prompting analysts' speculation that Japan would curb its sales of yen.

Still, Japan has argued that selling its currency remains an option to help exporters and safeguard a recovery.

Us treasury Secretary John Snow said the recent G-7 meeting in Dubai convinced him that Japan and other nations would help ease pressure on the US by agreeing to spur growth in their domestic economies rather than relying on US consumers to buy their exported goods to bolster economic growth.

"You can't have a successful world economy if everybody relies on the export sector," Snow said after the gathering in Dubai on Tuesday.

Zembei mizoguchi, Japan's vice finance minister for international affairs, told reporters in Tokyo last week that Japan would "take action as needed" against "excessive moves," while Bank of Japan Governor Toshihiko Fukui said G-7 nations had agreed to cooperate in halting such swings.

A rise in the value of the yen hurts earnings at Japanese exporters, such as Toyota Motor Corp, that have helped spur Japan's recent economic growth.

Japan's economy grew by an annualized 3.9 percent in the second quarter, the fastest pace in two and a half years.

Japan's government on Friday raised its forecast for economic growth this year to 2.1 percent from a previous prediction for the economy to expand by 0.6 percent.

On wednesday, the Bank of Japan's Tankan survey of business confidence will probably show the country's manufacturers were less pes-simistic in the third quarter than in the previous quarter.

Japan has so far spent trillions of yen ensuring the value of the yen against the US dollar remains at an appropriate level for exporters.

The country's finance ministry directed the BOJ to sell a record 9.03 trillion yen (US$80.6 billion) between January and July, according to government figures.

The central bank sold as much as 2 trillion yen this month, the Asahi newspaper reported earlier, without saying where it got the information.

The boj will release its sales figures for September tomorrow.

Tanigaki said foreign exchange rates should move in a stable manner and "reflect fundamentals of the economy."

The yen closed trading on Friday at 112.09 to the dollar in Tokyo. (Bloomberg News)

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