Yen's Sharp Rise Against Dollar Is Stirring Anxiety
Wednesday, March 5, 2008
TOKYO, March 4 -- Japan's finance and economy ministers voiced concern Tuesday about the yen's sharp rise against the dollar, warning that the trend may slow the nation's export-dependent economy.
The yen's surge sent the dollar to a three-year low Monday, when it touched 102.60 yen, the lowest since January 2005, amid anxiety over a possible U.S. recession. It closed at 103.14 yen in New York trading.
Economy Minister Hiroko Ota described the dollar's fall as "abnormally rapid."
Since the start of the year, the dollar has fallen more than 7 percent against the yen. That makes Japanese exporters' products more expensive overseas and erodes their earnings.
"I'm really concerned about the recent abnormal strengthening of the yen against the dollar," Ota told reporters. "The strong yen is hurting the profits of Japanese corporations."
There was no immediate indication that Japan's central bank was preparing to intervene in the currency market to try to weaken the yen -- a step the Bank of Japan last took in March 2004.
Finance Minister Fukushiro Nukaga said at a separate news conference, "We will keep watching movements in foreign exchange rates."
Japanese finance officials usually sharpen their currency rhetoric in stages before they intervene in the market. In the past, their descriptions of yen strength often changed from "rapid" to "a bit sharp" to "brutal," while they also threatened "appropriate action" as a warning before intervening.
A strong yen could also soften the impact of record-high prices of global oil and commodities for Japanese consumers and small companies, but analysts say a rising yen eventually brings more harm than good to Japan's economy as it could have broader effects on the economy over time.
Nukaga also said Japan's economy is still recovering, despite signs of deceleration shown by recent economic indicators. But he warned that the sinking U.S. housing market, high oil prices and unstable global markets pose "downside risks" to global growth.