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  • The Mighty Yan

    apan’s Fujii Says Yen Should Reflect Economic Fundamentals
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    By Mayumi Otsuma and Kyoko Shimodoi

    Sept. 19 (Bloomberg) -- Japan’s Finance Minister Hirohisa Fujii said foreign-exchange rates should reflect economic fundamentals, two days after sending the yen higher by saying he didn’t support a “weak” currency.

    “Foreign-exchange rates should be determined by the state of a nation’s economy, that’s what’s natural,” Fujii, who took office Sept. 16, told reporters in Tokyo. Asked about benefits of a stronger currency, he said “to answer such a leading question would label me as a supporter of a strong yen.”

    Fujii’s remarks yesterday indicate he opposes intervening in the currency market to restrain the yen, whose advance this week to the highest level since February may threaten Japanese exporters’ earnings. His comments this week are also a shift in tone from the outgoing government, which repeatedly stressed support for the “strong” dollar policy followed by the U.S.

    “Fujii thinks currencies should be set in a free economy,” said Masamichi Adachi a senior economist at JPMorgan Chase & Co. in Tokyo. The previous Liberal Democratic Party government “had said a strong dollar is desirable for Japan but their intention was to control the market” and hold down the yen, he said. “Fujii doesn’t agree with that view.”

    Investors are seeking to gauge the exchange-rate stance of the Democratic Party of Japan-led government after it took power for the first time this week. Former Finance Minister Kaoru Yosano in June said that his government had an “unshakable” trust in the strong-dollar policy followed by the U.S.

    Yen’s Advance

    The yen traded at 91.29 per dollar in late Tokyo trading. It reaching as high as 90.13 on Sept. 16, its highest level since February, after Fujii told reporters he doesn’t support a “weak yen.” He said then that exchange-rate movements weren’t “excessive,” and that “in principle” he opposes currency intervention.

    Policy makers around the world should avoid trying to “artificially weaken” their currencies to promote exports because that would eventually hamper global growth, Fujii, a 77- year-old lawmaker who served as finance minister 1993 to 1994, also said yesterday.

    The yen has gained against all 16 of the world’s major currencies in the past year, making exporters’ products less competitive. A stronger rate may also depress prices of imported goods. The Democratic Party of Japan won the Aug. 30 election pledging to support the purchasing power of consumers battered by two decades of economic stagnation.

    No Intervention

    Japan’s governments have refrained from intervening in currency markets since March 2004 after purchasing record amounts of dollars as the yen climbed.

    Fujii also said yesterday that he would respect the central bank’s autonomy and allow it to decide when to roll back emergency-credit programs that include buying corporate debt and providing limitless lending backed by collateral, which are due to expire Dec. 31.

    “The DPJ has deep respect for the Bank of Japan’s independence,” Fujii said. “As for the programs, I want to refrain from making comment.”

    To contact the reporter on this story: Mayumi Otsuma in Tokyo at [email protected]
    Last Updated: September 18, 2009 11:01 EDT

    Japan?s Fujii Says Yen Should Reflect Economic Fundamentals - Bloomberg.com
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

  • #2
    September 29, 2009
    As Yen Rises, Japan Faces Tricky Policy Choices
    By BETTINA WASSENER

    http://www.nytimes.com/2009/09/29/bu...gewanted=print

    HONG KONG — The yen spiked to an eight-month high against the dollar on Monday, weighing on the Japanese stock market and casting a spotlight on the tricky economic policy decisions facing the new government in Tokyo.

    As investors fretted about the pain that a strong currency means for export behemoths like Sony, Canon and Toyota, the benchmark Nikkei 225 stock index dropped 2.5 percent to close just above 10,000, a level not seen since July.

    The yen’s spurt to 88.23 on the dollar — its best since late January, when it hit 87.10, its strongest in 13 years — was set off by comments from the new finance minister, Hirohisa Fujii, who appeared to indicate that the authorities would not step in to weaken the currency artificially even if it appreciated further. After Mr. Fujii seemed to temper his comments later, the yen eased back to about 89.30 late in the Asian day.

    Even so, the yen is now about 11 percent stronger against the United States currency than it was in early June, when it took 101 yen to buy $1. This month alone, it has firmed about 4 percent against the dollar.

    The steady upward movement in Japan’s currency comes as its economy is still struggling to extract itself from its deepest recession in decades. Japan is highly dependent on exports, and thus vulnerable to any swings in its currency: A strong Japanese yen makes Japanese-made goods more expensive to consumers paying in euros or dollars and reduces the value of Japanese companies’ earnings overseas when they are repatriated.

    Like other exporting nations, Japan was hit hard by the collapse in demand for consumer goods in Europe and the United States during the global financial crisis last year. But the situation was aggravated for Japanese exporters by the headwind of a strong domestic currency.

    Worries about the yen’s strength have re-emerged in the last few months as the currency firmed again, weighing on the stock market in Japan, which has been one of the weakest performers in Asia this year.

    Analysts say a number of factors help to explain why the yen is strong despite the fragile state of the overall Japanese economy. But those factors, they add, are likely to fade next year.

    “The elections were seen as positive for the yen, as there was hope for a new environment in Japanese politics,” said Thomas Harr, a foreign exchange strategist at Standard Chartered in Singapore, referring to the national elections at the end of August, which swept the Liberal Democratic Party out of power for only the second time since World War II and handed victory to the Japanese Democratic Party.

    “In addition, short-term lending rates are currently actually higher than those in the United States, prompting many investors to move funds into yen assets,” he said.

    The new Japanese government wants to wean the economy — the world’s largest after that of the United States — away from its dependence on exports, and analysts say this may lead it to refrain from seeking to weaken the yen artificially by intervening in the currency markets.

    “If the yen is strong, that helps domestic consumers, as imports become cheaper,” said Arjuna Mahendran, head of Asia investment strategy at HSBC Private Bank in Singapore. “But it is clearly a risky rebalancing, as exporters suffer from a stronger yen.”

    Still, many analysts believe that the yen may not appreciate much further. Mr. Harr of Standard Chartered said the bank’s forecast was for the yen to finish the year at 88 to the dollar, then to weaken to 101 by the middle of next year.

    “The factors supporting the yen will continue to play out through the rest of this year, but will not continue much into next year,” he said.

    In addition, Mr. Mahendran said, Japan was quickly becoming more reliant on China — as opposed to the United States or Europe — as a destination for its exports, a factor that would reduce the economy’s exposure to currency swings against the dollar or euro.

    Meanwhile, uncertainties about how quickly the world’s leading economies will recover from the economic downturn could also weigh on Japan’s stock market in coming weeks, adding to the drag created by the currency concerns.

    “We’re now at the tail end of all this fiscal easing; no one is entirely sure how this will develop on that front going forward,” Mr. Mahendran said of government policies to stimulate lending and spending by banks and consumers.

    For equities markets to firm, he said, “we really need concrete evidence that company earnings will continue to recover quite substantially.”

    “That will be the proof of the pudding,” he said. “Profits in the second quarter of this year were mostly driven by cost-cutting, not top-line growth. The question now is how much end-demand has recovered, how much pricing power has recovered for companies.”
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

    Comment


    • #3
      andy,

      i think if you bring along JYan from CDF here, he'd appreciate this thread
      There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

      Comment


      • #4
        Someday, they might, just might, name a currency after me.
        “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

        Comment


        • #5
          Yen Strengthens to 14-Year High Against the Dollar on Global Risk Aversion The yen strengthened to a 14-year high against the dollar, climbing past 85 to the greenback and prompting speculation Japan will intervene in markets to preserve the nation’s export-led economic recovery.



          Dollar Increases as Dubai Debt Fallout Spurs Demand for Safety
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          By Oliver Biggadike and Ruby Madren-Britton

          Nov. 27 (Bloomberg) -- The dollar rose against most major counterparts as Dubai’s attempt to delay debt spurred investors to sell higher-yielding assets funded with the currency.

          The yen pared its gain against the dollar after touching a 14-year high on speculation Japan will intervene after Finance Minister Hirohisa Fujii said he will contact U.S. and European officials about exchange rates if needed. The Bank of Japan checked rates at commercial banks in Tokyo, seen as a type of verbal intervention, Kyodo News Service reported.

          “It seems the market underestimated the implications of what came out of Dubai and we’ve seen a scramble to close down short-term positions,” said Paul Robson, a currency strategist at Royal Bank of Scotland Group Plc in London. “We’re seeing the dollar doing better but the risk sell-off is overdone.”

          The euro fell to $1.4988 at 5 p.m. in New York, from $1.5019 yesterday and $1.4862 on Nov. 20. The yen rose 0.07 percent to 86.53 per dollar after climbing as high as 84.83, the strongest level since July 1995. The currency appreciated to 129.67 per euro, from 128.85, after reaching 126.91, the highest level since April 29.

          The dollar rose against 11 of the 16 most-traded currencies, surging 1.7 percent versus the South Korean won and 0.8 percent versus the Australian dollar. The yen was mixed against most major currencies. The greenback’s gains were pared after equity markets in Europe erased earlier losses and the Standard & Poor’s 500 Index climbed from its low for the day.

          ‘Systemic Risk Fears’

          “A combination of systemic-risk fears and thin market liquidity due to the U.S. holiday season has proven to be a combustible mix,” Gareth Berry, a Singapore-based currency analyst at UBS AG, wrote today. “The wider fallout has simply revealed how fragile both markets and risk appetite still are.”

          Dubai World, with $59 billion of liabilities, said this week it will seek a “standstill” agreement to delay repayment of its debt. The request sparked concerns that the eight-month, 42 percent surge in the MSCI World Index, a gauge of global stock markets, had outrun the underlying economic fundamentals.

          The dollar lost 33 percent versus the Brazilian real and 31 percent versus the Australian dollar since March as traders funded bets on higher-yielding assets in those currencies by selling the greenback. Interest rates in Brazil are 8.75 percent and 3.5 percent in Australia versus down to zero in the U.S.

          Interest Rate Expectations

          The dollar headed for the worst month since December against the yen before a report next week that economists said will show U.S. business activity declined, supporting the case for the Federal Reserve to keep borrowing costs near zero.

          The Institute for Supply Management-Chicago Inc.’s business barometer fell to 53 in November from 54.2 the prior month, according to a Bloomberg News survey before the Nov. 30 report. The Institute for Supply Management’s factory index dropped to 54.8 in November from 55.7 in October, according to a separate Bloomberg News survey before the data is released next week.

          The Dollar Index tracking the greenback’s value against six major trading partners fell 7.8 percent this year to 74.884 as interest rates declined, encouraging investors to borrow dollars and buy assets in markets offering higher yields. A so-called carry trade selling dollars to buy a basket of 10 currencies including the Brazilian real earned 1.4 percent this month compared with a 2.5 percent loss using yen funds, Bloomberg data show.

          The yen pared gains after Shizuka Kamei, Japan’s financial services minister, today urged an international response to halt the yen’s advance. Fujio Mitarai, head of Japan’s biggest business lobby and chief executive officer of Canon Inc., said Japan needs “urgent steps to counter this critical situation.”

          Fujii’s ‘Not Joking’

          “I’m very surprised by the willingness of the market to push dollar-yen lower,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York who correctly predicted the yen’s rally to 85 per dollar. “When Fujii says ‘I’m going to talk to my partners,’ he’s not joking.”

          Galy recommends selling the yen to buy the dollar because current levels close to a 14-year low are “good” for long-term trades of more than a year.

          Japan hasn’t sold its currency since March 16, 2004, when it traded around 109 per dollar. The Bank of Japan sold 14.8 trillion yen ($172 billion) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003. Japan last bought the currency in 1998, purchasing 3.05 trillion yen as the rate fell as low as 147.66.

          “If the dollar-yen falls below an 85 level the odds of intervention would rise materially,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “Clearly this is somewhat of an unfolding of events given previous signals of a strong yen policy but a strong yen will become a problem for the Japanese economy.”

          To contact the reporters on this story: Oliver Biggadike in New York at [email protected]; Ruby Madren-Britton in New York at [email protected]
          Last Updated: November 27, 2009 17:06 EST

          Dollar Increases as Dubai Debt Fallout Spurs Demand for Safety - Bloomberg.com
          “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

          Comment

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