Japan unveiled a $100-billion effort to help companies cope with a surging yen, signaling that officials may be resigned to the currency remaining high.
The government will release foreign-exchange reserves to the Japan Bank for International Cooperation for funding to aid exporters and spur purchases overseas, Finance Minister Yoshihiko Noda told reporters in Tokyo today. JBIC, as the lender is known, is a state-run export credit agency.
The yen traded at 76.64 per dollar as of 2:55 pm in Tokyo, stronger than the level before officials last intervened to weaken the currency on August 4. The yen’s rise since the March 11 earthquake to post-World War II highs is sapping exporters’ profits and undermining the nation’s recovery after three straight quarters of economic contraction.
“The government’s message may be that businesses need to come up with their own ways to deal with the strengthening currency, that they shouldn’t hold their breath for intervention,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd. “But the reality is that the demerits of a strong yen far outweigh the merits.”
The ministry will bolster monitoring of the currency market, requiring major financial institutions to disclose trading positions, Noda said. About 30 organisations will be subject to the procedures, a ministry official told reporters in Tokyo on condition of anonymity.
FOREIGN-CURRENCY RESERVES
Japan has amassed $1.07 trillion in foreign-exchange reserves, the world’s largest after China. The yen touched a postwar high of 75.95 per dollar on August 19 in New York.
The Bank of Japan applauded the finance ministry’s announcement, saying in a statement that the measures would “contribute to the stability” of currency markets.
The one-year funding program through the export credit agency is intended to encourage “the private sector to exchange yen-denominated funds to foreign currencies by supporting exports by small and mid-sized companies, securing energy resources and helping Japanese companies to purchase foreign businesses,” Noda said.
Today’s announcement is “somewhat underwhelming and unlikely to have much impact” on the exchange rate, said Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB. The move seems “unlikely” to increase the limited appetite that Japanese firms have for overseas purchases, the analyst said.
Japan’s debt rating was lowered by Moody’s Investors Service today, which cited “weak” prospects for economic growth that will make it difficult for the government to rein in the world’s largest public debt burden. The advancing yen is a “headwind against export competitiveness,” Moody’s said.
