The dollar has continued to rise against the yen over the past three weeks amid the release of several weak Japanese economic gauges, with some market traders saying the trend may further dog the market this week.

The traders said they expect the dollar to move between 121.50 yen and 126.50 yen this week.

Their projections compare with this week’s range of between 122.77 yen and 124.74 yen.

But most traders concurred that the structural overhaul plan unveiled Thursday by the administration of Prime Minister Junichiro Koizumi will send the yen sinking steeply further in the following two to three years.

“Since his economic plan presupposes that Japan will have to accept very low levels of economic expansion over the subsequent two to three years, it could provide the rationale for generating a further fall in the yen’s value,” said Daisuke Uno, chief market analyst at Sumitomo Mitsui Banking Corp.

“If this program is really implemented over the next two years, it could bring the yen to the 145 level,” Uno said.

“Since this administration has asserted that it will prioritize putting the debt-ridden fiscal house in order, it will not be able to use stimulatory fiscal spending to rev up the feeble economy,” he said.

The program of the Koizumi administration calls for capping net government bond issues in fiscal 2002 at 30 trillion yen .

“However, if the dollar enters the 140 level, financial authorities will intervene in the market to prop up the yen, since such a yen selloff will be perceived as a Japan-selling phenomenon,” he said.

Another currency trader at a major Japanese bank said, “If economic structural reforms make headway, it would definitely trigger bankruptcies of many companies and increase unemployment, thus aggravating the state of the economy over the short term.”

Even economic minister Heizo Takenaka, a key architect of the overhaul plan, on Thursday acknowledged the rationale of the traders’ predictions of the consequences of the plan.

Takenaka said the plan could force up to 200,000 people out of jobs, while predicting gross domestic product growth of no more than 0 percent to 1 percent for the next two to three years.

Still, he said, the long-term benefits of the plan will far outweigh any short-term disadvantages.

Global financial markets expect the U.S. Federal Reserve Board to announce an interest rate cut of 25 or 50 basis points at the conclusion of a two-day meeting Wednesday, the traders predicted.

Even a cut of 50 basis points would not cause a slide in the dollar’s value, because the market has already priced in a cut of that magnitude, they said.

“A 0.5-percentage point cut would not limit the upside of the dollar, because it would give a stimulus to U.S. share prices,” said Masahiro Ishikawa, vice president of the Japan unit of Bank One of the United States.

What could impact yen-dollar rates even more profoundly than a Fed action would be any stance on currency rates demonstrated by U.S. President George W. Bush and Koizumi when they meet in Camp David outside Washington on June 30, Shoichi Sakato, a dealer at Toyo Trust & Banking Co., said.

“The market would react strongly if Mr. Bush expresses willingness to condone a weaker yen springing from greater deflationary pressure in the Japanese economy which will be generated by Japan’s painful economic overhaul plan,” Sakato said.

“If Mr. Bush expresses readiness to tolerate a weaker yen, traders will respond by seeking to bring the dollar into the 130 yen level,” he said.

But it remains to be seen whether Bush will be able to express such a willingness “because a stronger dollar would deal a hammering to U.S. exporters,” he said.

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