Alerted by a faster-than-expected fall in the yen's value and the outcry from other Asian countries about the weak yen, the Finance Ministry appears to be having second thoughts on its foreign-exchange policy.

The push for a lower currency value in order to minimize deflationary pressure is one element of fiscal policy.

Although it is a matter of concern for the Bank of Japan, the Finance Ministry has exclusive authority to intervene in foreign-exchange markets. Thus remarks that affect yen-dollar rates must be made by Finance Minister Masajuro Shiokawa or other Finance Ministry officials.

We can assume there is little gap between the Finance Ministry's views and those of the BOJ regarding the effects of a weak yen on the economy.

The foreign outcry aside, the ministry also fears a cheaper yen would drive up long-term interest rates.

With the April introduction of the "payoff" limited deposit protection system drawing near, the ministry has launched a TV advertising campaign, calling on individual investors to buy more government bonds. But the call has gone largely unheeded.

The apathetic response has raised fears of an upswing in long-term interest rates because banks will probably face more funding difficulties over longer periods.

Almost all of the financial institutions have lower capital adequacy ratios owing to stock price falls as well as the burden of nonperforming loans, so they are desperately trying to avoid further losses.

If the Japanese government bond market were to collapse and long-term interest rates rise because of continuing yen weakness, the ministry would probably take decisive action.

One of the pillars of the BOJ financial policy is to support "intracity consumption" of government bonds (sales to local investors).

It is evident that further substantial weakening of the yen will result in an increase in the amount of outright purchases of government bonds.

The real intention of the Finance Ministry is to maintain the stability of the government bond market rather than ensuring the value of the yen, and for this reason, there is an even better chance for a hastened compromise with some Asian countries regarding currency policy that can now no longer be ruled out.