Japan may intervene to curb yen -> theglobeandmail.com/report-o … le1684366/
Japan is not ruling out market intervention to curb the yen’s rise, government sources said on Wednesday, sending the strongest signal yet that the currency’s march towards all-time highs may spur Tokyo into action.Japanese officials have repeatedly tried to talk the yen down recently amid concern that it could cripple an export-driven recovery , but markets have doubted they would risk going solo and all but ruled out a co-ordinated intervention with other Group of Seven countries.
there is more
edited: heading to reflect changes.
https://i717.photobucket.com/albums/ww178/Loveless_210/Seppuku3-1.jpg
BOJ Expands Bank-Loan Program in First Stimulus Since March -> bloomberg.com/news/2010-08-3 … nsion.html
The Bank of Japan expanded a bank- loan program, stepping up its monetary stimulus for the first time since March after the yen surged to a 15-year high and the government pressured the central bank to safeguard the recovery.
The BOJ will boost the amount of funds in the facility by 10 trillion yen ($116 billion) to a total of 30 trillion, the bank said in a statement after an emergency meeting in Tokyo. Governor Masaaki Shirakawa said in a press briefing that the bank is ready to take more action if necessary, and cited risks to its view that the economy will remain on a recovery track.
there is more
Japan Makes Fresh Attempt To Kill The Yen - businessinsider.com/bank-of- … lus-2010-8
It’s the moment half of Japanese industry has been waiting for – yet another round of monetary easing was announced today, aimed at helping to ‘ensure the economic recovery’ which is Japanese for ‘weakening the yen’.
there is more
Yen’s rise may lead 40% of makers to shift production abroad: survey -> japantoday.com/category/busi … oad-survey
TOKYO — Nearly 40% of major manufacturers in Japan said they will shift their production or development centers overseas if the U.S. dollar remains at the 85 yen level, a survey by the Ministry of Economy, Trade and Industry showed Friday. The survey, conducted earlier this month, also indicated the yen’s recent rise against the dollar would lead to a decline in profits for 65% of such companies.
Economy, Trade and Industry Minister Masayuki Naoshima said Friday that the yen’s strength will ‘‘bring a negative impact on the current economic condition, and would lead to the hollowing out of the (Japanese) industry in the mid- to long-term.’‘
In the wake of the yen’s recent rise, which is casting a shadow on Japan’s export-driven economy, the ministry conducted a survey on Aug 11-24 of a total of about 200 companies, including about 70 major manufacturing
there is more
Japan signals action to stem rising yen -> ft.com/cms/s/0/6f08849c-bc7e … ftcamp=rss
During the debate, Mr Ozawa reiterated his view that Japan should strongly express its readiness to intervene in the markets. Mr Kan said co-ordinated action would be difficult given that both the US and Europe were happy to have weaker currencies because it helped exports.
“Intervention seems to be more of a political matter right now than an economic one,” said Junya Tanase, a currency strategist at JPMorgan. He said the possibility of intervention remained low but had increased recently.
**Concerns among politicians and executives that the economy and company profits will be damaged by the yen’s strength have been intensifying as the currency notches up repeated 15-year highs.
there is more
Japan alarm over China’s JGB purchases -> ft.com/cms/s/0/47ce9942-bbe4 … ab49a.html
Japan has expressed concern about China’s recent sharp increase in purchases of Japanese government bonds in the latest of a series of sour notes in a traditionally tense bilateral relationship that both sides had worked hard to steady.
**China’s purchases of JGBs is an especially sensitive issue as it plays into anxieties in Japan about the strengthening yen and its impact on the economy.
**“There is something unnatural about the fact that China can buy Japanese government bonds while Japan cannot [buy Chinese bonds],” Yoshihiko Noda, the Japanese finance minister said.
In the first seven months of this year, Chinese net purchases of JGBs were about Y2,300bn ($27.4bn), according to the Japanese finance ministry.
there is more
nytimes.com/2010/09/11/busin … 11yen.html
Japan Plans Intervention to Stem Rise in the Yen HIROKO TABUCHI
TOKYO — The Japanese government is gearing up to intervene in global currency markets to curb a strengthening yen, Prime Minister Naoto Kan said Friday, signaling an effort to limit further damage to Japan’s export-led economy.
Any intervention is expected to do little to stem the yen’s rise in the long term, however, especially without cooperation from the United States or Europe, which are happy to see their exporters gain a competitive edge against the Japanese.
Increased purchases of yen-dominated bonds by China, which is seeking to diversify its foreign reserves away from the dollar, could also add to the upward pressure on the yen. And as long as the yen is still seen as a relative safe haven by investors, the buying is unlikely to stop, analysts say.
Mr. Kan repeated a common refrain from Japanese officials in recent weeks: that Tokyo was ready to act as needed to curb the yen’s advance. This time, though, he spoke in more detail than before about a possible intervention, saying Japanese officials were in talks with their counterparts overseas to lay the groundwork for such a maneuver.
…(cont’d)
irishtimes.com/newspaper/fin … 93697.html
Japan intervenes in currency markets to weaken yen LINDSAY WHIPP and MURE DICKIE in Tokyo and ALAN BEATTIE in Washington
TOKYO INTERVENED in the currency markets for the first time in more than six years to weaken the yen yesterday, sending it nearly Y3 lower against the dollar to mitigate the threat its strength posed to Japan’s export-reliant economy.
The unilateral intervention marks a further easing of monetary policy as the Bank of Japan has decided not to sterilise the funds used to buy dollars, instead allowing them to add to general market liquidity.
The action comes at a sensitive time that could complicate the debate on China’s controls on the renminbi and raise the possibility of competitive devaluations. The intervention sent the yen from a 15-year high of Y82.88 to as low as Y85.52 in a matter of hours.
The Nikkei 225 share index rose more than 2 per cent higher in response as investors took heart that Japanese exporters might get relief.
The Japanese government did not say how much was spent on the intervention but one trader suggested the figure could be roughly between $16 billion to $20 billion (€12.3-€15.3 billion) judging from historic market action.
…(cont’d)
guardian.co.uk/business/2010 … akened-yen
Calculating the cost of the weakened yen Nils Pratley
The significance of Japan’s intervention in the currency market is not to be underestimated
Currency interventions by G7 countries are rare events. But investors’ generally reacted by shrugging their shoulders today as Japan attempted to weaken the yen in order to give its exporters a boost.
Some reasoned that a weakening of the yen against the US dollar would have happened sooner or later, regardless of the Bank of Japan’s action.
Others argued that Japan’s ability to deliver further punches in the currency market is limited since it wasn’t able to enlist other central banks in co-ordinated intervention. On this view, Japan’s firepower would be overwhelmed if the US launches another round of quantitative easing, thereby dampening demand for dollars (probably).
Both standpoints are credible but they ignore the real significance of Japan’s intervention. China, accused by some in Washington of being a currency manipulator, now has air cover to carry on regardless. Beijing will feel that if one Asian economic powerhouse is allowed to intervene, so is the other. Those trade imbalances – growing again – will not be corrected easily.
Japan PM vows “decisive action” against strong yen -> finance.yahoo.com/news/Japan-PM- … 99388.html
Following the Japanese central bank’s intervention to sell yen on Wednesday, the dollar shot above the 85 yen level from 82.87 earlier in the day. The dollar stood at 85.28 yen in Tokyo Thursday afternoon.
A strong yen is sapping strength from the country’s already fragile economic recovery. The Japanese currency has risen about 10 percent against the dollar this year, and business leaders had been pressing the government for help. Japan’s vital exporters are worried by a strong yen because it erodes their foreign income when repatriated and makes their products less competitive in overseas markets.
Toyota Motor Corp. estimates that every 1-yen climb versus the dollar saps 30 billion yen from earnings.
Japanese officials did not provide a figure for how much yen the central bank had sold. But Japan’s top business daily Nikkei said the government may have sold more than two trillion yen ($23.4 billion), which would be largest single-day intervention on record.
there is more
More from Karl Denninger -> market-ticker.org/akcs-www?post=166748
Yen Intervention -> economistsview.typepad.com/timdu … ntion.html
What it all boils down to is this: There apparently is no motivation for global central banks to stop directing capital inflows at the US in an effort to support mercantilist objectives. If it isn’t China, it will be some other economy. And equally apparent, there is no motivation among US policymakers to address such government directed capital flows. Which will leave politicians falling back on ultimately harmful trade barriers. The absolute inability of US policymakers to seriously address a global financial architecture where a rule of the game is “when in doubt, by Dollars” will ultimately have serious consequences via disruptive adjustment when the system can no longer be maintained, via either external or internal forces.
kumaku
September 17, 2010, 12:40am
#9
That’s funny, they printed about the same amount of Yen as China had recently bought in bonds, especially if you take in the devaluation.
It’s a trade war, Japan’s trade with China has surpassed Japan’s trade with the US
China’s Economy Overtakes Japan -> thestreet.com/story/10836222 … japan.html
TOKYO – Japan lost its place as the world’s No. 2 economy to China in the second quarter as receding global growth sapped momentum and stunted a shaky recovery.
The figures underscore China’s emergence as an economic power that is changing everything from the global balance of military and financial power to how cars are designed. It is already the biggest exporter, auto buyer and steel producer, and its global influence is expanding.
China has been a major force behind the world’s emergence from deep recession, delivering much-needed juice to the U.S., Japan and Europe. Tokyo’s latest numbers, however, suggest that Chinese demand alone may not be enough for Japan or other economic giants.
“Japan is the canary in the goldmine because it depends very much on demand in Asia and China, and this demand is cooling quite a bit,” said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo. “This is a warning sign for all major economies that just focusing on overseas demand won’t be sufficient.”
there is more
Japan Intervenes to Bail Out America.com - Peter Schiff -> europac.net/commentaries/jap … americacom
This week, after the Japanese yen had surged to a fifteen-year high against the US dollar, the Japanese government decided to intervene in the foreign exchange market. To great fanfare, the Bank of Japan initiated a vigorous campaign to buy US dollars, thereby stemming the rise of the yen and pulling up the greenback. The effects were immediate, with the yen falling an astonishing 3% on the day of the announcement. At a time when American politicians are growing increasingly vocal about China’s currency manipulations, Washington was strangely silent on the Japanese move. This was completely overlooked by the hawkeyed media.
While missing this blatant irony, the media spin doctors cast the Japanese decision as an attempt by the island state to prop up its own fragile economy. More accurately, the intervention was done to help American consumers buy more cars and electronics from Japan. In truth, although more American purchases would nominally benefit some Japanese exporters, a weaker currency is a detriment to the overall Japanese economy.
The politics of currency intervention are actually quite simple. Japan’s economy is dominated by large manufacturers that export lots of goods to Americans. The problem is that Americans can’t really afford to buy in the quantities that they did just a few years ago. So, instead of looking for new customers with more money to spend, either in their own country or in other productive economies, Japanese manufacturers use their political clout to lobby their government to bailout their traditional U.S. customers. The bailout takes the form of a direct transfer of purchasing power from Japanese savers to American consumers, so that Americans can continue buying products they couldn’t otherwise afford. In short, pushing up the dollar allows Japanese exporters to postpone a necessary, but costly, restructuring.
there is more
China won’t repeat Japan’s FX error: central bank adviser -> reuters.com/article/idUSTRE68I09N20100919
(Reuters) - China will not repeat Japan’s mistake of the 1980s and let its exchange rate surge in response to foreign pressure, Li Daokui, an adviser to the People’s Bank of China, said on Sunday.
there is more
Japan Can’t Curb Yen’s Gains by Acting Alone, Bank of Korea Governor Says -> bloomberg.com/news/2010-09-1 … -says.html
Japan can’t resolve the difficulty of the strong yen unilaterally as currency-market intervention by a single country has limited effect, Bank of Korea Governor Kim Choong Soo said.
“Japan, alone, cannot resolve the problem of the strong yen,” Kim said at a media seminar in Incheon, southeast of Seoul, two days ago. “Japan will need policy coordination with others, including the U.S. and China. The effect is limited when one country tries to handle the issue by market intervention.”
Japan intervened on Sept. 15 for the first time since 2004 to protect its exporters, after the yen rose to a 15-year high against the dollar. The action stoked speculation that South Korea will move to counter a recent rise in the won, in an economy where overseas shipments are equivalent to about half of gross domestic product.
International trade has “significant impact on our relationship with other nations as we’re heavily dependent” on it, Kim said. His comments at the seminar were released today.
there is more
Japan FX action heralds new hot EM money battle -> dailytimes.com.pk/default.as … 010_pg5_23
LONDON: Japan’s yen-selling intervention represents a new headache for emerging markets already battling with huge capital inflows and could set off another round of steps to control the floodgates.
**Japan spent an estimated $20 billion in a single day of intervention on Wednesday and pointedly did not drain yen funds, leaving extra liquidity in the domestic banking system.
With borrowing costs in the developed world stuck near zero and speculation of further easing, emerging markets stand out as the top destination. The resulting impact on inflation would be troublesome for emerging economies, which are generally recovering faster, and where the Institute of International Finance expects to see inflows of over $700 billion in 2010.
Policy tightening measures to curb inflation would attract even more flows, creating a vicious circle. “A huge pool of liquidity is being created in developed economies and Japan is just another drop in that pool. Ideally you want this liquidity lent out to the domestic economy but some of it will end up in emerging economies,” said Michala Marcussen, head of global economics at Societe Generale.
She said this** could trigger a new round of restriction to capital flows**, following those in Latin America in the 1970-80s, in Asia in the early 1990s and emerging Europe in the 2000s.
“We’ve already seen a couple of policy measures taken by various countries. We could see more. It could potentially lead to a fourth wave of capital controls, ” Marcussen said.
there is more
Japan PM Announces $11 Billion Stimulus Plan, Asian Markets Rise -> dailyfinance.com/story/inves … /19628247/
Asian markets closed higher Friday. In Japan the Nikkei 225 Index climbed 1.5% to 9,239 and in China the Shanghai Composite Index inched up 0.3% to 2,663. Hong Kong’s Hang Seng Index added 0.4% to end the day at 21,257.
Japanese Prime Minister Naoto Kan is revving up efforts to boost growth in Japan’s flagging economy, and today announced a new $11 billion stimulus plan designed to promote job creation, coax shoppers back into stores, and stem the surge in the value of the yen. The government will lay out cash to provide consumer incentives for the purchase of environmentally friendly home appliances and home renovations. Funds will go to supporting low-carbon businesses and spurring job creation, including employment for recent graduates. The unveiling of this package is strategically timed, coming just days before Prime Minister Kan’s faceoff with democratic challenger Ichiro Ozawa in the Nov. 14 election.
there is more
Japan May Sell Yen for Second Day to Protect Economy -> bloomberg.com/news/2010-09-1 … overy.html
Japan may intervene in the foreign- exchange market for a second day to stem the yen’s gain to a 15- year high against the dollar and protect its exporters.
there is more
Dollar falls below 85 yen after Fed statement -> uk.reuters.com/article/idUKN2116362920100921
(Reuters) - The dollar extended losses and broke below 85 yen on Tuesday after the Federal Reserve said it would provide more monetary accommodation if needed to support the economy.
For currency control lessons read yen for renminbi - Gillian Tett -> ft.com/cms/s/0/cae051d6-c1bb … ftcamp=rss
A few days ago, I stumbled across an influential tome written two decades earlier by Taggart Murphy, a journalist-cum-banker, called The Weight of the Yen. It is wryly relevant today – though not in the way Murphy might have thought.
When Murphy wrote his book, what was worrying many American policymakers – and some Japanese – was the weakness of the yen; most notably, during the 1970s and early 1980s the yen had been kept artificially low by government controls, running at around Y250-Y300 to the dollar. As a result, the Japanese export machine boomed, undercutting American industry; and Japanese investors gobbled up American debt, keeping US Treasury yields artificially low .However, if you replace the word “Japan” with the word “China”, Murphy’s book creates a powerful sense of déjà vu. After all, these days it is Beijing which is primarily using a weak currency and “centralised credit allocation” – to use Murphy’s words – to boost an export machine, even as it gobbles up US Treasury bonds . Meanwhile, American politicians are now calling for a major revaluation of the Chinese currency, comparable to the so-called Plaza deal that was struck between five leading western countries in 1985 to revalue the yen.
Will this pressure actually work? Right now, as my colleague Alan Beattie reports, the chance of a new Chinese-style Plaza deal seems unlikely. But as the currency tussle intensifies, it is worth taking a closer look at some of the lessons from the period that were covered in Murphy’s book. Back in 1985, when the deal was first struck to strengthen the yen, many American observers initially considered it a success. For in the late 1980s, the currency moved towards the Y150 level, where it stayed for several years.
But – ironically – this “success” did not deliver much lasting stability at all. On the contrary, as the purchasing power of the Japanese currency swelled, Japanese institutions continued to gobble up overseas assets (including Treasury bonds). Meanwhile, the Bank of Japan slashed rates to ward off an export decline and stoke up more domestic demand. That paved the way for a crazy bubble, followed by a bust, and more currency instability in subsequent years. Or, as Murphy adds: “Changing the units of account had not the slightest chance of dealing with these fundamentals [distortions]. But they made for a more unstable world.”
there is more
Moves to weaken yen not over, says Kan -> ft.com/cms/s/0/9a1fa2dc-c5ac … ftcamp=rss
Japan stands ready to intervene again in foreign exchange markets, but also plans to put in place broader economic and monetary policies that will help to weaken the yen, according to Naoto Kan, the prime minister.
there is more
