A historic increase in the yen has put the Japanese government on edge after the traditionally safe currency reached a post-war record high. This has got the Japanese think tank ready to take action in the event the currency decides to try for another surge up.
Sell yen and buy dollars
The think tank includes the government and the Bank of Japan, and they have already had meetings to discuss plans for an intervention. The Nikkei business daily reported that in the event that the yen increases suddenly the strategy set would see yen sold and dollars bought on the foreign exchange market.
The popular daily newspaper revealed that Japan’s central bank is also thinking about monetary easing alongside the original plan of selling yen.
The Yomiuri Shimbun, Japan’s largest daily, has stated an unnamed senior finance minister said that Japan are in position to intercept any movements and sell yen even if it is on the overseas market if there is any indication that there are speculative moves to drive the currency up to a new level.
Traders have said that with the current global economy and chaos surrounding the financial markets investors have been concentrating their interests in the Japanese currency, together with the Swiss France both are seen as safe bets especially with the prospect of another looming global recession.
The steps have been taken simply because a strong yen really hurts Japanese exporters which is the country’s main economic driving force.
Figures released early last week have showed that the Japanese economy has shrunk less than expected in the second quarter of the year. This has built hope that there is some recovery post March 11 earthquake and tsunami disasters.
Long-term policies need to be given serious thought
The Asahi Shimbun Japan’s second largest newspaper has said: “The government and the Bank of Japan do not hesitate to carry out market intervention.”
Japan’s Finance Minister Yoshihiko Noda has said that the government would need to give some serious thought to the long-term policies that are required to ease the economic impact of the yen it is remains at this current ceiling price.