ID :
99077
Sat, 01/09/2010 - 21:48
Auther :
Shortlink :
https://oananews.org//node/99077
The shortlink copeid
FOCUS: Prospect of weaker yen uncertain even after Kan`s remarks
TOKYO, Jan. 9 Kyodo -
At his first news conference after becoming Japan's new finance minister on
Jan. 7, Naoto Kan surprised the currency market by mentioning the specific
exchange-rate level he believes to be desirable.
He said that many Japanese companies think it would be ideal for the Japanese
currency to be around 95 yen against the dollar and that he will make efforts,
including working together with the Bank of Japan, to get the yen to
appropriate levels.
Though his comments may fuel expectations among Japanese export-related
companies, which benefit from improved global competitiveness and repatriated
overseas profits under a weaker yen, analysts are skeptical over the
sustainability of the effects of the remarks on the currency market.
Kan's remarks immediately stirred yen selling, briefly lifting the dollar by
more than half a yen on Jan. 7. The dollar gained further ground in overseas
markets, leading to rises in Japanese stocks the following day, pushed by
buying in export-oriented shares.
But analysts believe the currency market tends to be influenced more by
fundamental issues than remarks by a country's finance minister, especially
after major countries agreed earlier to make progress on narrowing global
imbalances, notably the U.S. current account deficit.
Masayuki Hoshina, chief economist at Okasan Securities Co., played down the
impact of Kan's remarks on the currency market, saying the rise was mainly
attributable to the dollar's recent uptrend against the yen.
While the direct impact of Kan's remarks on the currency market is unlikely to
last for long, it was very unusual for an incumbent finance minister to refer
to specific levels for the exchange rate, Hoshina said.
''Basically, exchange rates should be decided by the market...If a (finance
minister) makes such comments, he will give the impression that he is an
amateur who doesn't know about markets and the economy,'' he said.
Kan's stance sharply contrasts with that of his predecessor Hirohisa Fujii, who
repeatedly warned that countries should refrain from competing in currency
devaluation, despite the global economic downturn.
Fujii's remarks on foreign exchange were often perceived by the market as
indicating Japan's reluctance to intervene and acceptance of a strong yen,
contributing to a sharp rise in the yen against major currencies last year
after he took office as finance chief in mid-September.
On Jan. 8, Kan said a weaker yen is preferable for the Japanese economy and
hinted that Japan is ready to intervene in the market if necessary, though
Prime Minister Yukio Hatoyama said government officials should not make
comments on foreign exchange rates.
Shigenobu Nagamori, president of Nidec Corp., a major maker of spindle motors
for hard disk drives, welcomed Kan's comments, telling a news conference in
Kyoto, ''His remarks are likely to cheer people up in industrial circles.''
But analysts are skeptical over whether Kan's remarks can continue to push the
dollar higher toward 95 yen, given that the Japanese monetary authorities are
not in a position to conduct yen-selling intervention, especially when the
dollar has started rising amid signs of a U.S. economic recovery.
''Mr. Kan probably wanted to make clear that he is different from Mr. Fujii,''
said Hideki Hayashi, global economist at Mizuho Securities Co.
''But it is a different issue whether (Japan) would actually be able to
intervene in the market'' if the dollar falls below the 90 yen line to a level
which the government is likely to feel undesirable, Hayashi added.
At a time when concerns are emerging that the relationship between Japan and
the United States could deteriorate over such diplomatic issues as the transfer
of a U.S. Marines airfield in Okinawa Prefecture, Japan will not be able to
create another problem by chasing a weaker yen on its own, analysts said.
''The United States is likely to feel it undesirable if Japan only seeks a
weaker yen without resolving (the base) issue,'' said Okasan Securities'
Hoshina.
Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp., said Kan's
remarks surprised the market as they came at a time when the yen was not in
fact strengthening against the dollar.
''But the market is unlikely to react so much in the future unless there are
exceptionally unusual comments (from the finance minister) as his stance became
clear on this occasion,'' Yamashita added.
==Kyodo
At his first news conference after becoming Japan's new finance minister on
Jan. 7, Naoto Kan surprised the currency market by mentioning the specific
exchange-rate level he believes to be desirable.
He said that many Japanese companies think it would be ideal for the Japanese
currency to be around 95 yen against the dollar and that he will make efforts,
including working together with the Bank of Japan, to get the yen to
appropriate levels.
Though his comments may fuel expectations among Japanese export-related
companies, which benefit from improved global competitiveness and repatriated
overseas profits under a weaker yen, analysts are skeptical over the
sustainability of the effects of the remarks on the currency market.
Kan's remarks immediately stirred yen selling, briefly lifting the dollar by
more than half a yen on Jan. 7. The dollar gained further ground in overseas
markets, leading to rises in Japanese stocks the following day, pushed by
buying in export-oriented shares.
But analysts believe the currency market tends to be influenced more by
fundamental issues than remarks by a country's finance minister, especially
after major countries agreed earlier to make progress on narrowing global
imbalances, notably the U.S. current account deficit.
Masayuki Hoshina, chief economist at Okasan Securities Co., played down the
impact of Kan's remarks on the currency market, saying the rise was mainly
attributable to the dollar's recent uptrend against the yen.
While the direct impact of Kan's remarks on the currency market is unlikely to
last for long, it was very unusual for an incumbent finance minister to refer
to specific levels for the exchange rate, Hoshina said.
''Basically, exchange rates should be decided by the market...If a (finance
minister) makes such comments, he will give the impression that he is an
amateur who doesn't know about markets and the economy,'' he said.
Kan's stance sharply contrasts with that of his predecessor Hirohisa Fujii, who
repeatedly warned that countries should refrain from competing in currency
devaluation, despite the global economic downturn.
Fujii's remarks on foreign exchange were often perceived by the market as
indicating Japan's reluctance to intervene and acceptance of a strong yen,
contributing to a sharp rise in the yen against major currencies last year
after he took office as finance chief in mid-September.
On Jan. 8, Kan said a weaker yen is preferable for the Japanese economy and
hinted that Japan is ready to intervene in the market if necessary, though
Prime Minister Yukio Hatoyama said government officials should not make
comments on foreign exchange rates.
Shigenobu Nagamori, president of Nidec Corp., a major maker of spindle motors
for hard disk drives, welcomed Kan's comments, telling a news conference in
Kyoto, ''His remarks are likely to cheer people up in industrial circles.''
But analysts are skeptical over whether Kan's remarks can continue to push the
dollar higher toward 95 yen, given that the Japanese monetary authorities are
not in a position to conduct yen-selling intervention, especially when the
dollar has started rising amid signs of a U.S. economic recovery.
''Mr. Kan probably wanted to make clear that he is different from Mr. Fujii,''
said Hideki Hayashi, global economist at Mizuho Securities Co.
''But it is a different issue whether (Japan) would actually be able to
intervene in the market'' if the dollar falls below the 90 yen line to a level
which the government is likely to feel undesirable, Hayashi added.
At a time when concerns are emerging that the relationship between Japan and
the United States could deteriorate over such diplomatic issues as the transfer
of a U.S. Marines airfield in Okinawa Prefecture, Japan will not be able to
create another problem by chasing a weaker yen on its own, analysts said.
''The United States is likely to feel it undesirable if Japan only seeks a
weaker yen without resolving (the base) issue,'' said Okasan Securities'
Hoshina.
Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp., said Kan's
remarks surprised the market as they came at a time when the yen was not in
fact strengthening against the dollar.
''But the market is unlikely to react so much in the future unless there are
exceptionally unusual comments (from the finance minister) as his stance became
clear on this occasion,'' Yamashita added.
==Kyodo
