The Japan Thread

Japan's currency intervention hits record 20.06 trln yen in 2003

TOKYO (AFX-ASIA) - Japan's finance ministry today said it spent a record 20.06 trln yen on currency intervention in 2003 aimed at preventing a sharp rise in the yen from hurting the economy.

The figure topped the previous annual record of 7.64 trln yen spent on yen-selling intervention in 1999 and surpassed the nation's annual current account surplus estimated at about 14 trln yen.

In the last month alone, Japanese monetary authorities spent 2.25 trln yen to stop the yen from hurting the nation's economic recovery, ministry data showed.

The ministry did not issue details of market operations for a period from Nov 27 through Dec 26.

The yen has strengthened consistently against the US currency this year because of demand from foreign investors to buy Japanese equities as the world's second-largest economy showed signs of life after years in the doldrums.

The dollar also came under selling pressure as investors became more concerned about the widening US current account and budget deficits, which indicate Americans may be borrowing too much to finance their spending.

The dollar stood just below 107 yen in late trade today in Tokyo, showing a 10 pct depreciation from just above 119 yen at the start of the 2003 trading day here.

A strong yen hurts Japanese exporters by making their goods less price competitive abroad and reducing their repatriated overseas earnings. This in turn puts in doubt the sustainability of Japan's export-led economic recovery.

Japan's major allies, including the United States, wish to see the Japanese economy sustain recovery and absorb more imports from them but they have criticized Tokyo for trying to manage exchange rates through massive intervention, leaving Tokyo alone in the uphill battle of the markets.

30/12/2003 11:53