Japan to keep buying EFSF bonds: Azumi

Kyodo

The government is ready to keep buying rescue bonds to help ease the eurozone’s sovereign debt crisis, despite the downgrading of the credit rating on the area’s bailout fund, Finance Minister Jun Azumi indicated Tuesday.

The credit cut Monday by Standard & Poor’s for bonds issued by the European Financial Stability Facility “will not immediately lead to an erosion of our confidence in EFSF bonds,” Azumi told reporters.

The government has kept buying a certain ratio of the emergency bonds as it has considered the debt a “valuable” financial product, he said, adding S&P’s move “will not change our view.”

Tokyo has spent more than €3.5 billion ($4.5 billion) of its foreign exchange reserves to purchase EFSF bonds issued last year and this year to support Ireland and Portugal.

S&P lowered the credit rating of EFSF bonds by one notch from the top AAA to AA+, citing insufficient efforts by European leaders to address fiscal problems in the region.

The move came after the U.S. rating agency Friday downgraded the ratings of sovereign debt issued by nine of the 17 eurozone governments, including France. The credibility of the EFSF has rested on those governments.

Azumi also said Japan is “carefully” watching the euro’s recent fall against the yen, which he said has negatively impacted the earnings of Japanese exporters.

Azumi made little indication as to whether Tokyo will make any aggressive response to the yen’s appreciation, such as intervention. Japan stepped into the currency market last year to stem the yen’s rise against the dollar.

“Foreign exchange rates . . . move sometimes considerably. I think we will carefully respond” while watching any progress in negotiations in Europe to bring Greece’s debt under control, Azumi said.

Japan has been seen as preparing financial assistance to the eurozone through the International Monetary Fund.

But Azumi has said it will come only after European leaders do their utmost to ease tensions over the crisis.

A Finance Ministry official said Azumi is scheduled to hold talks with George Osborne, Britain’s chancellor of the exchequer (finance minister), in Tokyo on Wednesday. Osborne will also meet with Bank of Japan Gov. Masaaki Shirakawa.