Unrealized losses on Japan's $1 trillion foreign currency reserves amount to about 18.5 trillion yen (US$187.2 billion) when the dollar is around 100 yen, Finance Minister Fukushiro Nukaga said on Thursday.
Dollar and Yen
The dollar fell to a 13-year low below 96 yen earlier this month as the U.S. credit mess deepened, increasing valuation losses on Japan's external reserves, which are thought to be mostly made up of dollar assets. On Thursday it traded around 98.75 yen.
Japan intervened heavily in the currency market in 2003 and early 2004 to help the economy tackle deflation. It sold a total of 35 trillion yen for the dollar in the 15 months to March 2004, during which the dollar traded between 105 and 120 yen.
"Unrealized losses are certainly increasing. The amount of losses is estimated at around 18.5 trillion if the dollar is at 100 yen," Nukaga told parliament.
He defended the government's stance of sticking with the dollar, saying if Japan had sold the dollar it could have had an unexpected outcome on currency markets.
Nukaga also declined to say if he is considering intervening in currency markets and repeated the ministry's stance that currencies should reflect economic fundamentals and excessive moves are undesirable.
"I've made it clear that I see last week's currency moves as excessive," Nukaga said when asked about the recent fall in the dollar.
He said he expects Japan's economic recovery to pick up pace eventually but was closely watching developments in the U.S. economy and financial markets.
"Japan's economic recovery is at a standstill," Nukaga told an upper house financial committee. "But as the impact of the revised building codes (that have caused a sharp drop in housing starts) is fading, I expect the pace of recovery to pick up pace.