Japan's Finance Minister Yoshihiko Noda confirmed that Japan has intervened in the currency market for the first time since March 2004 to stem the yen's rise, which has spiked to a 15-year highs against the US dollar and severely battered Japan's export-led recovery, according to Xinhua news.
"We have conducted an intervention in order to suppress excessive fluctuations in the currency market," the report quoted Finance Minister Yoshihiko Noda saying.
"We will closely monitor currency developments, and take firm action including intervention," Noda said, adding that the move by Japan was unilateral.
The Bank of Japan (BOJ) stepped into the market to sell yen and buy dollars shortly after 10:30 a.m. in Tokyo, analysts said, sending the dollar up to 84.36 yen from a fresh 15-year low of 82. 87 yen earlier.
The yen's recent appreciation has severely weighed on the Tokyo stock market of late and following news of Japan's intervention the key Nikkei stock index climbed 1.8%.
Many Japanese companies have set their assumption rates for dollar/yen at 90 yen and at 110-115 yen for euro/yen in the year to March 2011 and when the yen is strong profits are eroded when repatriated, hence a weaker yen will be welcomed particularly by Japanese exporters.
Japan hasn't actually intervened in the currency market since March 2004 when the yen was at 109 per dollar at that time the BOJ sold 14.8 trillion yen (177 billion U.S. dollars) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003.
Market strategists had previously thought that Prime Minister Naoto Kan, who staved off a leadership challenge from ruling party heavyweight Ichiro Ozawa on Tuesday, would be reluctant to intervene in currency markets so quickly and was more tolerant of a stronger yen, which rose after he won the Democratic Party of Japan's leadership election yesterday.
The revised view in the market is that the Kan now is actively trying to reverse the perception that he lacks a proactive stance when it comes to the strength of the yen and his readiness to act decisively. – Source: XinhuaNet