The yen fell sharply Friday in Tokyo trading and hit 144 against the dollar after U.S. Treasury Secretary Robert Rubin said he saw no signs of economic recovery in Japan and dashed hopes for yen-supporting market intervention.
At 5 p.m., the dollar was quoted at 144.01-04 yen, compared with 144.05-15 late Thursday in New York, and up sharply from 141.67-70 yen at 5 p.m. Thursday in Tokyo. The dollar rose to as high as 144.75 during the day, a level last seen in August 1990.
The yen’s continuing slide also dampened investor sentiment in the stock market. The key Nikkei average of 225 issues on the Tokyo Stock Exchange opened the day below the 15,000 mark, although it rallied later to end the day at 15,022.33.
Reviving the Japanese economy, not intervention, is the only realistic way to arrest the yen’s sharp fall against the dollar, Rubin said before a Senate panel Thursday.
Finance Minister Hikaru Matsunaga reiterated that the government is ready to take decisive action, hinting that monetary authorities will conduct yen-buying market intervention.
Prime Minister Ryutaro Hashimoto also indicated the yen has lost too much ground. Speaking to reporters, Hashimoto said, “I do not believe (the exchange rate) reflects” the current state of the economy.
Touching on concerns that the yen’s weakness would increase the U.S. trade deficit with Japan, the prime minister said, “Given that the matter has been left unaddressed, I think the United States is not interested in discussing the problem of the current account (imbalance).”
Hashimoto was apparently expressing his displeasure with a remark Rubin made before the Senate panel Thursday, in which he ruled out market intervention as a solution for the exchange rate problem. “The weakness of the yen reflects the economic conditions in Japan, and can only be remedied by restoring economic strength in Japan,” Rubin said.
He said market intervention may be “a temporary tool” to influence exchange rates but cannot be “a fundamental solution.” Currencies will follow a country’s economic fundamentals, and Japan’s fundamentals are “troubled,” he said.
The United States last intervened to prop up the yen six years ago, but any immediate dollar selling appeared to be ruled out by Rubin. “Intervention is appropriate when we deem it to be appropriate … we will act when it is appropriate,” Rubin said. “The whole answer lies in what Japan is going to do.”
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