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. Last Updated: 07/27/2016

Japan Acts to Slow Rise Of Yen, Assure Recovery




TOKYO -- The Bank of Japan leapt into the currency market Friday to slow the yen's rise, as Tokyo's top economic planner said the economy was improving and should achieve full recovery next year.


Ruling politicians bemoaned the damage that the yen's surge could do to an economy that has finally begun to recover from its worst post-war recession.


But Economic Planning Agency chief Taichi Sakaiya said that Japan wanted to prevent currency volatility and had no intention - and little hope - of reversing an upward trend that analysts say is based on fundamentals.


"It would be difficult to influence the broad will of the market," Sakaiya said, adding authorities had no specific target in mind for dollar/yen levels.


The BOJ intervened in the market to push down the yen after the Japanese currency surged to a three-year high of around 107.7 yen to the dollar in early trade.


The surge followed Thursday's surprise data showing Japan eked out a second straight quarter of growth in April to June. That followed a stunning 2 percent rise in January-March.


The dollar-buying bout pulled the Japanese currency back to around 110 yen to the dollar, but it rose back toward 109 later, and analysts said the yen was still on an upward trend.


Some economists argue that Japan's economy can ride out the adverse affects of a yen at around 110 to the dollar.


But if it strengthens to 100 yen, it could have a more devastating effect by making exports less competitive andexposing domestic firms to competition from a flood of cheap imports.


That could be precisely where the yen is headed given signs the economy has put its worst post-war recession behind it.


Sakaiya earlier reinforced the bullish hopes, pointing to recent brighter economic data.


"The government should lead the economy to a full recovery track in the next fiscal year," he said at a news conference.


Ruling politicians are clearly fretting that the yen's rise could kill the recovery before the private sector can wean itself from government's fiscal life-line.