Fujii Denies Backing Stronger Yen, Says Japan May Act
Japanese Finance Minister Hirohisa Fujii said the government may act to stabilize the foreign- exchange market and denied that he supported a stronger yen, a day after the currency surged to an eight-month high.
“If the currency market moves abnormally, we may take necessary steps in the national interest,” Fujii said at a news conference in Tokyo today.
The remarks signal Fujii, 77, is trying to dispel investors’ perceptions that he favors appreciation of the yen and would be unlikely to step into the currency market to stem its gains. After his Democratic Party of Japan came into power for the first time two weeks ago, Fujii said the idea of a weaker yen helping the nation’s exports is “absurd.”
“Fujii’s reversing his rhetoric,” said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Some economists have been saying that this is the beginning of a new strong-yen policy instituted by the DPJ, and Fujii’s comments in the past two days are intended to correct those interpretations.”
The yen has gained about 16 percent in the past year, threatening the country’s export-led recovery by making Japanese products shipped abroad more expensive and eroding the value of repatriated profits.
Not Rapid
Toyoo Gyohten, after being appointed adviser to Fujii today, told reporters that the yen’s recent gains “aren’t rapid.” Gyohten, a former top currency official at the Finance Ministry, he doesn’t see any “major disturbances” in the foreign-exchange market.
In an interview yesterday, Gyohten, 78, expressed support for the U.S. dollar as the world’s reserve currency, saying there’s “no better alternative to the dollar.”
Fujii said that history shows yen-devaluation policies hurt the global economy and countries shouldn’t compete to devalue their currencies. At a forum co-hosted by Bloomberg yesterday, he said he “never said I will leave the yen to strengthen” and he didn’t necessarily accept gains in the currency.
The yen traded at 89.71 per dollar at 5:49 p.m. in Tokyo after yesterday touching 88.24, the strongest level since Jan. 23. The Nikkei 225 Stock Average climbed 0.9 percent after slumping 2.5 percent yesterday on the currency’s advance.
Reaction ‘Understandable’
“Although Fujii insisted that he was misinterpreted, it’s understandable that market players read into his comments the way they did,” said Takumori at Sumitomo Mitsui. “Today’s exchange rate suggests that the market is correcting itself. A yen in the 80s is excessive.”
Deputy Prime Minister Naoto Kan said today that currency markets should be “as stable as possible” and he’s “carefully” monitoring the effect of yen moves on the economy.
Eiji Hirano, a former Bank of Japan executive director, said Fujii intends to retain the option of selling the yen should it gain excessively.
“I don’t think Minister Fujii meant he has ruled out intervention completely,” Hirano said in interview on Sept. 25. “If the yen advances drastically and people panic, intervention can’t be ruled out.”
Japan hasn’t stepped into the foreign-exchange market since the first quarter of 2004, when the central bank at the behest of the Finance Ministry sold a record 14.8 trillion yen ($165 billion) to weaken the currency.
Yen May Weaken
Hirano, who is now a director at Toyota Financial Services Corp., said current market moves don’t warrant action and the yen may depreciate over time because the economy is likely to weaken as the population shrinks and ages.
Some investors say the DPJ’s support for households indicates it’s more willing to allow a stronger yen than the Liberal Democratic Party, which governed Japan for almost all of the past 54 years.
“The DPJ’s foreign-policy bias toward Asia and away from the U.S. and economic policy focused more on households than on large corporations should translate into medium- to long-term tolerance for yen appreciation,” said Tomoya Masanao, an executive vice president at Pacific Investment Management Co.
Fujii stressed in yesterday’s speech that households should underpin Japan’s economic growth rather than exporters.
“The days of high growth driven by exports and big companies are over,” he said. “We want to focus on policies that will foster spending by consumers and domestic demand.”