The value of the yen steeply rose against the U.S. dollar last week when the stock market was in the doldrums — the Nikkei Average Index fell below 9,000. On Thursday, the yen shot past the record ¥79.75 to the dollar set in April 1995, peaking near ¥76. Joint market intervention on Friday by Japan, the United States and Europe somewhat helped to alleviate pressure on the yen.
It is believed that speculative investors bought the yen thinking that Japanese insurers and exporters would dispose of overseas assets and convert them into yen to pay costs of the March 11 earthquake and tsunami. Given the damage caused by the natural disaster and the crisis at Tokyo Electric Power Co.'s No. 1 Fukushima nuclear power plant, the yen was expected to fall against the dollar; instead, the reverse happened.
A steep rise in the value of the yen will inevitably weaken the competitiveness of Japanese exporters, contribute to the hollowing out of Japanese industries and cost employment opportunities in Japan. The government and the Bank of Japan should take necessary additional actions promptly to prevent speculative investors from ruining the Japanese economy.