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. Last Updated: 07/27/2016

U.S. Help Turns Tide For Yen




HONG KONG -- Across East Asia, traders enjoyed something Thursday they hadn't seen for months: Japan's yen pulling out of its tailspin against the U.S. dollar, and the region's battered stock and currency markets recording some big gains.


Even China and Hong Kong, two critics of Japan's anemic economy and the responses of its government, praised Tokyo for intervening with Washington on behalf of the yen Wednesday.


"This is exactly the type of thing that should happen,'' said Jean-Michel Severino, a senior World Bank official, as the U.S. dollar traded sharply lower against the yen in Tokyo on Thursday, one day after the United States and Japan jumped into global currency markets to halt the yen's slide.


A stronger yen could reduce the risk of more East Asian economies slipping into recession as the one-year anniversary of the region's financial crisis nears, Severino said.


The gains in Asia also were good news for Russia, whose own financial crisis has been aggravated by the troubles in other emerging markets.


Currency traders estimate that Washington sold $2 billion to buy yen and that Tokyo sold a similar amount.


Although the effort has proved to be an initial success, economists warned that sentiment about the Japanese currency could reverse again if the Japanese government does not move quickly to deal with a deepening recession.


In Tokyo, Japanese leaders scrambled Thursday to explain how they plan to bring the world's second-largest economy out of its deepest recession in 50 years.


Prime Minister Ryutaro Hashimoto, in an hour-long nationally televised news conference, said the nation's economic health would improve after the government implements its latest stimulus plan.


He also pledged that his government would come up with a plan to clean up the problem of bad loans at the nation's banks.


Declining financial markets and worries about banks had severely discouraged consumers, Hashimoto said, conceding that his government's decision to raise the nation's sales tax last year had hurt the economy.


The prime minister made the comments just hours before a delegation of U.S. finance officials, headed by Deputy Treasury Secretary Lawrence Summers, arrived in Tokyo.


Summers said only that he looked forward to "discussing a range of economic issues between the United States and Japan.'' The U.S. group was to attend a series of private talks with Japanese leaders.


On Saturday, finance deputies from the Group of Seven leading industrial countries, including Summers, will meet in Tokyo.


As Wall Street waited for follow-up steps by Japan to fix its ailing economy, U.S. stocks slumped Thursday in early trading. On Wednesday, the Dow Jones Industrial Average had risen on news of the intervention.


For months, Japan's yen had been sliding against the U.S. dollar, leading some economists to believe that the East Asian financial crisis could enter a far more dangerous phase that would hurt the United States and the rest of the world.


The U.S. trade deficit soared to a record $4.5 billion in April as the Asian financial crisis battered U.S. exporters. While that drag on the economy has been largely offset by booming consumer demand, the administration of U.S. President Bill Clinton administration has grown concerned that consumer confidence could be rattled if the Asian crisis spreads to other parts of the world and triggers a crash in the high-flying U.S. stock market.


In an effort to contain the crisis, Clinton authorized the sale of dollars in currency markets to stem a free-fall in the value of the Japanese yen.


Following the lead of the Dow Jones Industrial Average, which gained 164.17 points Wednesday, the Tokyo Stock Exchange's Nikkei Stock Average jumped 646.16 points, or 4.39 percent, closing at 15,361.54.


Shares also soared on other markets in the region.


The key Stock Exchange of Thailand index closed 8.1 percent higher, while in South Korea, the key index climbed 7.1 percent.


Hong Kong's blue-chip Hang Seng Index closed 6.4 percent higher, and the Philippine Stock Exchange Index rose 6.6 percent to 1,828.59, its heftiest gain in four months.


Share prices in Indonesia and Malaysia also rose.


After hitting a 9 1/2-year low earlier this week, Singapore's Straits Times Industrials Index surged 5.6 percent at one point before profit-taking trimmed some earlier gains. It closed up 2.3 percent.


Taiwan's key Weighted Price Index jumped 4 percent, New Zealand's key NZSE-40 capital index closed up 1.6 percent, and Australia's All Ordinaries Share Index jumped 2.3 percent.


Across Southeast Asia, currencies opened sharply higher Thursday as well, following the rallying yen. But the dollar recovered slightly in afternoon trading, with traders citing the region's political uncertainties as reasons to buy the safe-haven U.S. currency.