Japan warns against rising yen

TOKYO: Japan issued a fresh warning against a rising yen yesterday, despite growing complaints from European leaders about Asian currency levels, saying it would step into the market if exchange rates deviate from fundamentals. 

“As the G7 statements have been saying, currency rates should reflect fundamentals. If movements deviate from fundamentals we will act appropriately,” Finance Minister Sadakazu Tanigaki told a news conference after a cabinet meeting. 

He said there was no change in Japan's basic stance on currencies, and he would keep watching exchange rate movements “very, very carefully”. 

The dollar slumped to a five-year low of 101.78 yen on Friday as a view spread in the market that Asian currencies need to share more of the burden of the dollar's decline, giving a boost to the yen. It was hovering near 102.05 yen yesterday. The dollar was firm against other major currencies. 

Asked if he supported the idea of resolving the problem of global imbalances through currency rates, he said: “I think efforts to promote structural reforms should be at the centre of the issue.” 

But he said each country had different structural and fiscal problems. 

Japan has been warning against a rise in the yen since October, when the dollar began its latest descent against major currencies due to growing worries about the US budget and trade deficits. 

But Tokyo, which fears too strong a yen will hurt Japanese exporters' overseas profits and derail the economy, has stayed away from the markets, a stance that sharply contrasted with its aggressive dollar buying campaigns from January to mid-March last year. 

The yen's latest gains were triggered by comments by European Central Bank (ECB) officials that Asian currencies, especially China's, should bear a greater share of the burden of adjustments in foreign exchange rates. 

Last week, ECB President Jean-Claude Trichet said there was agreement among the Group of Seven (G7) industrial nations that “there is a need for emerging Asia to go progressively in the direction of perhaps progressive and orderly appreciation of the sub-currencies”.  

Trichet's comments were seen as directed at China and the pegging of its currency to the dollar, which some nations say gives it an unfair trade advantage, but helped push up the yen. – Reuters

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