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. Last Updated: 07/27/2016

Rising Yen Scares Authorities, Market




TOKYO -- Japanese Finance Minister Kiichi Miyazawa summoned the head of the central bank Thursday for a talk on what to do about the ballistic yen and dispatched his currency tsar to discuss the problem with U.S. authorities.


But while Bank of Japan Governor Masaru Hayami agreed with Miyazawa on the need to respond to the yen's surge, he showed no indication that he would further ease monetary policy to weaken the currency.


Miyazawa said he had asked Hayami to meet him at a Tokyo hotel - a rare gathering on neutral turf - to discuss foreign exchange and monetary policy and "to match views" before they meet their counterparts from the Group of Seven leading industrial nations late next week.


But the summoning to a hotel and leaking of the meeting in advance suggested Miyazawa wanted to pressure the central bank.


The minister also told his top international deputy, Haruhiko Kuroda, to discuss the foreign exchange market with his counterparts from other nations in Washington.


Economists and market players say Tokyo's go-it-alone interventions in the market cannot succeed unless joined with yet more pumping of money into the economy or joint intervention with Washington.


The yen has strengthened some 13 percent since Japanese data in June began showing life in the world's second-largest economy as money has poured into Japanese assets.


The government says that in general a rise in the yen is a sign of a welcome "buy Japan" mentality but frets that the recent surge could smother the nascent recovery that engendered it.


A stronger yen erodes the yen value of Japanese companies' overseas earnings and exerts deflationary pressure on the Japanese economy.


Adding to pressure on the policy-makers was a sharp fall Thursday in the Tokyo stock market's benchmark 225-share Nikkei index, which tumbled as much as 4 percent during the session.


It rebounded somewhat to end with a 2.73 percent loss of 485.63 points to 17,291.59, still its biggest loss for the year.


News of the Miyazawa-Hayami meeting helped the dollar claw back above 105 yen on speculation that it would produce fresh BOJ action.


But the party was short-lived, with the currency sinking a full yen after the two men offered no indication of a change in BOJ policy.