Japan today stepped into the currency markets for the first time since 2004 in a bid to stem the yen's rise against the dollar and safeguard a faltering recovery. The move came a day after Prime Minister Naoto Kan reaffirmed his leadership in a ruling party election victory that saw off a candidate outspoken in his calls for intervention to help safeguard Japan's recovery.
The yen fell to $85.03 to the dollar after the yen-selling, dollar-buying intervention, which was triggered by the Japanese unit's earlier surge to a fresh 15-year high of $82.86. The euro strengthened to 110.32 yen from 107.75.
'We conducted a market intervention,' Finance Minister Yoshihiko Noda said. 'We will continue to monitor the movement of the market and take determined steps, including intervention, when necessary,' he added.
After weeks of trying in vain to talk the yen lower through verbal warnings, the government's tone had hardened ahead of today's decision. The yen's appreciation has put many Japanese exporters at a disadvantage against foreign rivals as it erodes their earnings and competitiveness. Noda said the move was made unilaterally, but added Japan had been in touch with foreign governments amid qualms from the likes of Europe and the US that exchange rates should be kept free-floating.
In a statement, Bank of Japan governor Masaaki Shirakawa said uncertainty over the US economy meant downside risks to Japan 'warrant attention'. 'The Bank of Japan strongly expects that the action taken by the Ministry of Finance in the foreign exchange market will contribute to stable foreign exchange rate formation,' he said.
The central bank has come under government pressure to do more to offset the impact of the strong yen on Japan's economy, and recently expanded a multi-billion-dollar loan scheme in an effort to help revive a recovery.