Moves to Weaken Yen Not Over, Says Japan's Kan
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.
In an interview with the Financial Times, Mr Kan stressed that Tokyo’s yen-selling intervention last week was forced by “drastic” exchange rate moves, a reference to the 15-year highs Japan’s currency hit against the dollar following his victory in a ruling party leadership battle.
Mr Kan said there was a “common recognition” among G20 nations that overly rapid currency movements were undesirable and that he would seek to promote understanding of Japan’s action in New York this week.
While some European and US politicians have criticised Tokyo for acting unilaterally, Mr Kan made clear his government was ready to continue to intervene alone if necessary.
In his first interview since becoming prime minister in June, he said: “If there is a drastic change (in the currency), such intervention is unavoidable”.
But Mr Kan stressed that Tokyo wanted to create a “total” package of measures to expand domestic demand and encourage a more appropriate currency level. One possibility, he said, was to use the yen’s strength to invest in natural resources overseas, adding that continued efforts by the Bank of Japan to set appropriate monetary policy were also essential.
“I think it is necessary to combine economic policy and monetary policies that will be conducive to ... a (yen exchange rate) slightly lower than the current level,” Mr Kan said.
The prime minister waved aside suggestions that Tokyo’s intervention made it harder to persuade China to allow the renminbi to rise against the dollar.
Tokyo was suffering from drastic currency movements while concerns about Beijing centred on the maintenance of its dollar peg despite sustained economic growth, Mr Kan said. “I think the issues of China’s renminbi and Japan’s yen are completely different.”
Mr Kan’s visit to New York comes at a difficult time with Beijing demanding the immediate release of a Chinese fishing boat captain detained after clashes with Japan’s Coast Guard near disputed islands.
In spite of growing tensions, Mr Kan said: “I think that if it is dealt with calmly, it is entirely possible this will be a temporary problem.”
Mr Kan will on Wednesday give a speech to a UN summit on the Millennium Development Goals at which he will highlight Japan’s contribution with initiatives which involve healthcare policies for mothers and babies and an approach to basic education known as “School for All”
He said he would focus on two new initiatives that are intended to tap Japan's rich experience in social policy for the benefit of developing and poor nations.