Japan has begun efforts to weaken the ever-growing yen by intervening in currency markets, after the yen rose to its highest level against the US dollar since World War II.
According to Reuters, Japanese Finance Minister Yoshihiko Noda told the media on Thursday that the Japanese government had decided to act on its own after one-sided rises in the yen threatened to derail the country’s economic recovery from the earthquake and tsunami disaster suffered in March.
Noda told the press conference that he expects the Bank of Japan to take appropriate similar action. However, Noda declined to comment on any details of the intervention, or on whether Japan would make any further interventions.
The Japanese yen has been rising rapidly in recent days as concerns continue to mount over the financial situations in the US and Europe. However, a soaring yen would hurt the Japanese export market due to the rise in cost of Japanese goods.
Japanese Economics Minister Kaoru Yosano also told Reuters on Wednesday that the recent increase in the yen’s value was excessive and didn’t reflect economic fundamentals.
Japan last intervened in the currency markets in March this year when expectations of fund repatriation after the earthquake pushed the yen to a record high. However, in that scenario, Japan had acted in conjunction with the G-7 to lower the value of its currency.
In September 2010, Japan had attempted to intervene unilaterally to weaken the yen, though their efforts were met with little success.
However, the latest attempt by the Japanese government seems to have worked in the short-term at least. The yen was pushed down to about 78.30 to the dollar from a level of around 77.
On Wednesday, Prime Minister Naoto Kan instructed his cabinet to remain vigilant and mindful of the rising yen in steering economic policies.