TOKYO — Japan’s government called for global action to calm currency markets Thursday as it took bold measures to help Japanese companies trying to recover from the March 11 disasters and a rising yen.
The Finance Ministry said it took the drastic measure of intervening in currency markets in order to weaken the yen, which has risen in value by 5 percent in the past month amid investor concerns over skyrocketing debt in Europe and the United States. A high-value yen makes Japanese exports more costly for foreign importers, decreasing demand for Japanese goods.
In a coordinated move, the Bank of Japan increased its purchase of bonds and other assets to put more cash into the country’s struggling economy.
Major Japanese exporters welcomed the moves but remained cautious about whether they will do enough to weaken the yen long-term. “It is good news, not only for Sanyo, but for other Japanese companies who export products in order to expand our businesses overseas,” Sanyo Corp. spokesman Kurato Yamada told The Washington Times. “It’s hard to say how much this will help or not because it’s just happened today.”
Sanyo, which made 60 percent of its sales outside Japan in 2010, is one of many Japanese exporters whose ability to hire workers, invest in projects, and earn profits overseas is hurt by a strong yen compared with declining currencies in the United States and Europe.
“We cannot easily raise vehicle prices as we used to before,” Toyota Senior Managing Officer Takahiko Ijichi told reporters on Tuesday. Bloomberg News reported that the 15-yen change in the currency over the past year has blown nearly $4000 in profit off the sale of a $20,000 vehicle.
Yokohama-based automaker Nissan said the strong yen pushed down its profits by 55 billion yen in the second quarter, even though its sales increased by 1.6 percent. “The prolonged and rapid appreciation of the yen goes beyond a level that can be overcome by the efforts of a single company,” Nissan Corporate Vice President Joji Tagawa told reporters last week. “The impact will eventually spread to employment.”
Finance Minister Yoshihiko Noda said that the government had to intervene unilaterally in the markets because the strong yen was slowing Japan’s recovery from the March 11 disasters. “The one-sided rise of the yen could have a negative impact,” Noda told reporters in Tokyo on Thursday. “I will continue to watch the market closely and will take appropriate action. Given the current international financial situation, I would like to continue to communicate with other countries.”
Economics Minister Kaoru Yosano said world leaders should coordinate further action to stabilize currency markets. “This is also a question of whether the yen is strong or other foreign currencies are weak, so I think G7 and G20 officials will need to thoroughly discuss currency moves from here on as a global issue.”
While the yen fell sharply from 76 to 78 yen per dollar in global currency markets on Thursday, many investors wondered if the trend would last. The yen has continued to surge despite a coordinated effort by major industrialized nations to weaken the Japanese currency immediately after the March disasters. The yen shot up then as Japanese corporations repatriated profits from overseas to shore up their domestic operations, damaged by the March 11 tsunami.
Japan also tried to put the brakes on a rising yen by acting on its own to sell 2.1 trillion yen last September, when 83 yen bought one US dollar. Despite Japan’s high government debt, owed mainly to domestic bondholders, many investors have continued to view the yen as a safe haven compared with uncertainty in markets elsewhere.
The central government in Japan has also been pressuring the Bank of Japan to help bolster an economy hit by power shortages and supply disruptions. The central bank’s policy board responded on Thursday by voting unanimously to expand an asset purchase program to 50 trillion yen ($638.3 billion) from 40 trillion yen. “We pride ourselves for taking drastic and powerful monetary easing today,” said central bank Governor Masaaki Shirakawa. “The yen’s appreciation comes at a time when the economy faces the problem of power supply restrictions. We judged that rises in the yen have economic costs including the risk of damaging corporate sentiment and encouraging companies to shift production overseas.”
The central bank also cited worries about how inflation in emerging markets, and the levels of debt in Europe and the United States, could affect Japan’s recovery. Many analysts in Tokyo said Japan’s currency moves might not be enough to alter trends over the long term. “As long as concerns for the downside risks in the U.S. economy and expectations for the Fed’s further easing measures persist, it is hard to expect the (dollar-yen) to return to high enough levels to alleviate the negative pressure on exporters’ earnings,” Junko Nishioka, chief economist at RBS Securities Japan, said in a research note, according to the Associated Press.