Bank of Japan Gov. Yasuo Matsushita expressed concern Jan. 22 over the fast pace at which the yen is weakening against the dollar and said authorities will carefully monitor the foreign exchange market.Speaking at a news conference, the head of the central bank said it was desirable for foreign exchange rates to be stable and reflect actual economic circumstances. He said that so far, the yen’s depreciation has led to such situations as a slowdown in the drop in the nation’s trade and current account surpluses and a rise in import prices. “But it seems the pace at which the yen is depreciating (against the dollar) is a little high and we will closely watch the market, including possible effects of the exchange rate changes,” he said.On the continued slide in stock prices, Matsushita said large fluctuations could affect both companies and households. He added that authorities will look into the causes of the drop and see whether there are any effects on the economy.Lower stock prices are expected to hurt financial institutions’ balance sheets as March 31, the end of the business year, approaches, through the reduction of the value of their hidden assets, making them less able to write off their bad loans. This prospect in turn has led to drops in prices of bank stocks, adding to the fall of the market in general. On this point, Matsushita encouraged financial institutions to take steps to win market support such as drawing up restructuring plans that would increase the efficiency of their operations.

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