Authorities plan to bolster funds needed to intervene in the currency market and will lengthen monitoring of foreign exchange market positions as the yen stays near postwar highs, Finance Minister Jun Azumi said Friday.
The ministry aims to raise the issuance limit for bills to fund intervention to ¥165 trillion, an increase of ¥15 trillion, Azumi said. He also said the ministry will require financial institutions to report their market positions until the yearend, from the initial plan of until the end of September.
The expanded measures underscore policymakers’ concern that a currency near post-World War II highs may damage the recovery from the March quake and tsunami. Industrial production rose 0.8 percent from the previous month, while employers cut payrolls by 160,000, according to government reports released Friday.
“I don’t think this implies immediate intervention, but this reflects authorities’ strong desire to show their resolution to fight against speculative traders,” said Masafumi Yamamoto, chief currency strategist at Barclays Bank in Tokyo.
“The yen staying around the high 70s could throw cold water on the Japanese economy’s recovery trend,” Azumi said. “We will take bold actions when needed and we don’t rule out taking any necessary measures while closely monitoring speculative trading,” he said.
The Finance Ministry said it spent ¥4.51 trillion in August in intervention, the most since 2004. It was the first time Japan sold yen in the market since March.
Raising the financing-bill limit would make a record ¥46 trillion available for intervention in the year ending next March, Azumi said. The issuance increase will be included in the third extra budget the government is planning to fund reconstruction from the March disaster, he said.
Separately, the Finance Ministry said in a statement Friday it is requesting a 5 percent increase in funds for debt-servicing for next fiscal year.
Industrial production up
Industrial production in the nation rose 0.8 percent in August from the previous month for the fifth-straight month of increase, leading the industry ministry to declare Friday that output has “almost recovered” from the devastating March 11 earthquake and tsunami.
But prospects appear uncertain amid the yen’s persistent strength and slowing global economies, with the industry ministry warning that it “will be necessary to keep watch on future developments.”
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