Tokyo could intervene after the new rise of the yen

The Japanese Minister of Finance has honed his arguments Wednesday on the strength of the yen after the Nikkei newspaper had reported that Tokyo would consider unilateral intervention on the foreign exchange market if speculators push the yen upwards.

While it should meet in the day Prime Minister Naoto Kan and other members of the Government, the Minister of Finance Yoshihiko Noda told reporters that he would intervene appropriately whether to do so, speech he had not taken up.

"When necessary shall have to act appropriately," he said in response to a question about the evolution of the yen.

Market participants, however, questioned the ability of unilateral intervention to contain the strong yen, which hit a high Tuesday of 15 years against the dollar and nine years against the euro and weighs heavily on the Stock Exchange Tokyo which closed Wednesday at a low of 16 months.

"The dollar fell to 83 yen, the probability of intervention has increased, but it would take more than intervention," said Kiichi Murashima, an economist at Citigroup Global Markets.

"This must be accompanied by an easing (of monetary policy) of the BoJ (Bank of Japan) to have any effect."

DOUBTS ON MEASURES TAKEN the radical

The soaring yen and the decline of the Tokyo Stock Exchange have increased the probability of announcing a further easing of monetary policy the Bank of Japan before its next meeting on interest rates scheduled for 6 and 7 September, Reuters said sources familiar with the matter.

Speculators doubt however that the BoJ is ready to take drastic measures.

"If they really want to do something about the yen (…) they must create the conditions to anticipate inflation," said Martin Schulz, senior economist at Fujitsu Research Institute.

"But I do not think the BoJ will move in that direction."

While it took nearly 10% since the beginning of the year against the greenback, against which it was trading around 5:45 GMT at 84.28 dollars, some investors believe the greenback could fall to a record high against the Japanese currency, at least 80 dollars.

So far the Japanese authorities tried to contain the strong yen by simple oral statements, the Minister of Finance stressed on Tuesday the growing irritation of Tokyo against the Japanese currency rise.

Now, about Yoshihiko Noda had the opposite effect to that intended, because dealers have so wanted to test the determination of Japanese authorities to stem the yen's appreciation.Why he decided to get tough on Wednesday.

EMERGENCY MEETING

Tokyo should be difficult to convince the United States and Europe to join its efforts on the foreign exchange market, weakening their own currencies being favorable to their exports.

Yoshihiko Noda declined to comment on rumors suggesting a possible meeting with Secretary of U.S. Treasury Timothy Geithner. The U.S. Treasury has not made any comments.

Japan is no longer intervened on the foreign exchange market since 2004.But the situation is becoming even more worrying than the Japanese export growth slowed to an annual rate in the fifth consecutive month in July.

According to an estimate of Nomura Securities, every increase of one yen against the dollar will result in a decrease of 0.9% of current earnings of major Japanese manufacturing groups for fiscal year 2010-2011, which will close in March.

According to sources close to the situation, the most likely scenario is that the BoJ will increase the size, or prolongs the duration of its mechanism of short-term financing in place in December.

The Nikkei newspaper wrote Wednesday that the BoJ intends to take further monetary easing and could do so in the context of an emergency meeting.

August 25th, 2010 in blog, connection, networks, occupation, tidings | tags: , , , ,