The Group of Seven (G7) industrialized nations have come forward to coordinate their intervention in the currency market in an effort to help Japan recover from a devastating earthquake and tsunami.
The authorities of Japan, UK, US, Canada and the EU started a planned rolling intervention at 9 am in Tokyo to weaken the Yen and the currency immediate fell to Y81 to a USD from over Y79.
The G7 intervention comes after a decade, when in 2000 it propped up the euro and shows the global sympathy for Japan.
The Japanese currency was trading at Y83 to a dollar before the Earthquake had struck. However, it had zoomed to Y76.25 by yesterday as Japanese financial institutions and investors started selling assets to send back home money for reconstruction.
“In response to recent movements in the exchange rate of the yen associated with the tragic events in Japan, and at the request of the Japanese authorities”, said the statement issued by the G7 ventral banks and finance ministers, adding that “the authorities of the US, the UK, Canada, and the European Central Bank will join with Japan, on March 18, 2011, in concerted intervention in exchange markets”.
The G7 did not specify a price band for the Yen nor did they say the amount of Yen they plan to sell in the open markets. However, it is understood that their motto is to stabilise Yen and the intervention is unlikely to last long.
“The Bank of Japan strongly expects that Japan’s concerted action with G7 member countries in the foreign exchange market will contribute to the stable formation of foreign exchange rates”, said Masaaki Shirakawa, governor of Bank of Japan.
The coordinated intervention was decided after a teleconference was held on Friday morning and a series of consultations among sub-members. US Treasury Secretary Tim Geithner spoke with finance ministers Yoshihiko Noda of Japan and Christine Lagarde of France, along with US Fed Chairman Ben Bernanke and ECB President Jean-Claude Trichet separately.