The government outlined a set of strategies Monday for responding to the soaring yen, including financial assistance for struggling exporters.
The measures, presented at a meeting of economic ministers and Bank of Japan officials, encourage Japanese companies to sell yen for dollars and other major currencies to accumulate enough funds to make external investments.
The measures also offer incentives to prevent them from shifting production and other facilities abroad, which would hollow out the export-dependent economy.
The yen’s extended climb is hurting exporters, who have seen their competitiveness eroded by cheaper exports from rivals in South Korea and other emerging economies. This has sparked talk of a hollowing out of Japanese industry as firms move to countries with cheaper labor costs to offset damage from the strong yen.
“We will continue to closely watch (currency) market developments and take decisive steps when they prove necessary,” the government document said, adding it expects the BOJ to collaborate with it and make “appropriate and decisive policy responses.”
The move comes as Prime Minister Naoto Kan prepares to step down and after the Democratic Party of Japan elected Finance Minister Yoshihiko Noda as his successor. The policy priorities are likely to be reflected in the budgets to be formulated by the next administration.
Financing aid for small and medium-size exporters, as well as corporate incentives to keep research, development and production facilities in Japan, are the major goals of the plan. Another is promoting tourism, which has plunged since March 11.
In a related move, the Finance Ministry unveiled last week an unprecedented plan to provide $100 billion in cheap loans from foreign-exchange reserves and encourage Japanese firms to accelerate mergers and acquisitions abroad, as well as investments in securing overseas energy resources by making the best use of the yen’s strength.