TOKYO — Japan opted for a rare intervention in the foreign currency market on Thursday, curbing a strong yen that has undermined the recovery of its disaster-hit economy.
After the government sold an unspecified amount of yen, the currency’s value fell more than 3.32 percent against the dollar. By early evening in Tokyo, the yen was valued at 79.94 against the dollar, up from 77.02 earlier in the day.
The adjustment comes after weeks of concern from politicians and business leaders who described the yen’s strength as a major long-term problem for Japan’s economy, which has quickly rebuilt its earthquake-hit infrastructure and restored its production.
A strong yen lifts the price of Japanese exports overseas, and it decreases foreign-made profits when they are repatriated back home.
Though Japanese officials did not immediately provide the details of the intervention, Finance Minister Yoshihiko Noda said Tokyo was in communication with other countries about the move. He told reporters that the yen’s recent appreciation against the dollar was “one-sided” and did not accurately reflect the trends in Japan’s economy.
The intervention move was buffeted by fresh monetary policy measures from Japan’s central bank, which met Thursday and voted to inject another 10 trillion yen into the economy with a combination of asset purchases and loans.
Thursday’s move marked Japan’s third intervention in less than a year. Last September, with the yen valued in the mid-80s against the dollar, Japan sold off 2.1 trillion yen. In March, one week after the earthquake and tsunami that battered this country’s northeastern coastline, the Group of Seven nations coordinated another intervention, bringing the yen down from its record high of 76.25 against the dollar.
But market forces again boosted the yen’s value in recent months, with traders viewing Japan as a safe haven amid debt concerns in the United States and sovereign risk in Europe. Just in the past month, the yen has surged about 5 percent. The foreign currency market caused some Japanese authorities to worry that major companies will move production overseas.
Many major Japanese companies had forecast that the yen would be valued this year in the low-80s against the dollar. The Honda Motor Co. on Monday said that the poor exchange rate wiped roughly 22.5 billion yen from its profits in the latest quarter.
“The current environment makes it unreasonable to keep producing in Japan,” Toyota President Akio Toyoda said at a news conference last month. He added, though, that “we can’t simply abandon domestic production when conditions get tougher.”
After the earthquake, production in Japan dropped off drastically, with factories damaged and supply chains broken. Households, too, cut back on spending, further complicating an economy that has been trying to climb back from two decades of stagnation.
But recently, Japanese economists have forecast moderate but positive gains for the second half of fiscal 2011. In an address July 13, Bank of Japan governor Masaaki Shirakawa said that “production has recently shown clear signs of picking up as the restoration of supply-chain disruptions has progressed steadily at a faster-than-expected pace.”