Thursday, July 30, 2009

Japan govt spokesman warns against forex swings

TOKYO, July 9 (Reuters) - Japan’s top government spokesman said on Thursday that excessive currency moves are undesirable as they would hurt the stability of Japan’s economy and financial markets.
The yen jumped to a five-month peak of 91.80 yen to the dollar on Wednesday as mounting doubts about the health of the global economy spurred risk aversion. [FRX/]
A soaring yen could jeopardise Japan’s chances of pulling out of a recession, raising the prospect of Tokyo intervening in the markets to weaken its currency for the first time in five years. [ID:nN08397762]
“As I have said before, excessive moves in market rates have a bad impact on the stability of the economy and financial conditions and therefore are undesirable,” Chief Cabinet Secretary Takeo Kawamura told a news conference.
“We’ll keep a close watch on currency market trends.”
Growing unease about the global economy has prompted investors to rush out of trades that bet against the yen while favouring higher-yielding but often riskier currencies.
Market participants said they were cautious about the possibility of intervention by Japanese officials to fight the currency’s rapid rise, which hurts exporters by eating into the profits they make overseas when converted back into yen.
But few expect any immediate intervention as the yen is still far from January’s 13-year peak near 87 yen to the dollar. On Thursday the dollar climbed back to above 93 yen. [ID:nT48609]
Japan’s top finance bureaucrat Kazuyuki Sugimoto pointed out both the merits and the drawbacks of a strong yen for the world’s No.2 economy.
“As for the impact of the yen’s rise on the Japanese economy, it would lead to a decrease in exports and corporate profits and affect households as income and employment conditions deteriorate,” Sugimoto told a news conference.
“On the other hand, it will push down food and other import costs, which would help corporate profits and personal consumption,” the vice finance minister said, adding that he would be watching currency market moves closely.
The euro climbed 0.4 percent to 129.50 yen EURJPY=R after falling as low as 127.00 yen on Wednesday, its lowest since mid-May.
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