ID :
169065
Thu, 03/17/2011 - 18:43
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https://www.oananews.org//node/169065
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Yen's crisis-driven rise adds worries over Japan's economy
TOKYO, March 17 Kyodo - The yen's spike to a postwar record against the U.S. dollar in the aftermath of the massive earthquake and tsunami and unresolved nuclear plant crisis added to growing worries over the course of the Japanese economy, given that the yen-buying wasn't prompted by a positive economic view.
''This is an excessive level reached due to speculative moves,'' Japan Business Federation Chairman Hiromasa Yonekura said, referring to the yen's surge, while calling on the Japanese government and the Bank of Japan to take ''decisive action'' including currency intervention to stem the yen's appreciation.
Currency players also say that the yen's rise was propelled by speculation that Japanese companies would repatriate their overseas assets into yen to cover disaster-related costs, rather than actual repatriation flows.
Friday's deadly earthquake and ensuing tsunami damaged factories and restricted corporate and everyday activities amid an electricity shortage while unfolding troubles at a stricken nuclear plant raised fears over a potential catastrophe.
The dollar skidded to a postwar record low of 76.25 yen early Thursday in Sydney amid the speculation over the repatriation move, before recovering ground later.
The yen tends to rise in times of stress as market players who have been investing in higher-yielding riskier assets often buy back the low-yielding yen when uncertainty grows. This explains the yen's popularity when geopolitical risks increase in the Middle East, for example, or when other financial doubts arise.
The memory of the Great Hanshin Earthquake in January 1995 also played a part in the yen's jump, some dealers said. After that quake, the yen's rise accelerated, prompting the dollar to hit its previous postwar record of 79.75 yen in April that year.
''If you are a market participant, the image of the move back then should have come into mind, and players were bracing for a chance to buy the yen following the latest quake,'' said a dealer at a foreign bank.
The yen's abrupt surge could damage the international competitiveness of Japanese exporters, a key engine of the nation's growth, and lower stock prices further, taking a toll especially on banks and insurers' financial ground.
''It (the yen's rise) is expected to deal a heavy blow to corporate earnings'' ahead of the end of March settlements of Japan's business year, said Tadashi Okamura, chairman of the Japan Chamber of Commerce and Industry.
''We cannot bear this,'' Japan Automobile Manufacturers Association Chairman Toshiyuki Shiga said separately as a higher yen reduces exporters' overseas profits when repatriated. Shiga is also Nissan Motor Co.'s chief operating officer.
A one yen rise against the dollar reduces pretax profits of 300 major nonfinancial companies listed on the Tokyo Stock Exchange's First Section by 0.7 to 0.8 percent, according to Daiwa Securities Capital Markets Co.
''If the yen falls to the mid-70 yen level, a downswing in profits will be larger than that,'' its senior economist Yoshimasa Takashina said.
Weak post-quake stock markets are also feared to damage corporate earnings.
The 225-issue Nikkei Stock Average plummeted 10.55 percent Tuesday, its third-largest percentage decline on record, to hit 8,605.15, its lowest level since April 2009. Since then, it has recovered some of its lost ground, the Nikkei's closing level Thursday is still 14 percent lower than a week earlier, when the quake did not happen.
According to Nomura Securities Co., latent gains in stockholdings of nonfinancial 1,950 listed companies totaled 3.5 trillion yen as of Tuesday, down 60 percent from the end of March, 2010.
''There is a possibility that their latent losses could surpass 1 trillion yen for the business year ending March 2011,'' said Kengo Nishiyama, senior strategist at the brokerage firm.
''This is an excessive level reached due to speculative moves,'' Japan Business Federation Chairman Hiromasa Yonekura said, referring to the yen's surge, while calling on the Japanese government and the Bank of Japan to take ''decisive action'' including currency intervention to stem the yen's appreciation.
Currency players also say that the yen's rise was propelled by speculation that Japanese companies would repatriate their overseas assets into yen to cover disaster-related costs, rather than actual repatriation flows.
Friday's deadly earthquake and ensuing tsunami damaged factories and restricted corporate and everyday activities amid an electricity shortage while unfolding troubles at a stricken nuclear plant raised fears over a potential catastrophe.
The dollar skidded to a postwar record low of 76.25 yen early Thursday in Sydney amid the speculation over the repatriation move, before recovering ground later.
The yen tends to rise in times of stress as market players who have been investing in higher-yielding riskier assets often buy back the low-yielding yen when uncertainty grows. This explains the yen's popularity when geopolitical risks increase in the Middle East, for example, or when other financial doubts arise.
The memory of the Great Hanshin Earthquake in January 1995 also played a part in the yen's jump, some dealers said. After that quake, the yen's rise accelerated, prompting the dollar to hit its previous postwar record of 79.75 yen in April that year.
''If you are a market participant, the image of the move back then should have come into mind, and players were bracing for a chance to buy the yen following the latest quake,'' said a dealer at a foreign bank.
The yen's abrupt surge could damage the international competitiveness of Japanese exporters, a key engine of the nation's growth, and lower stock prices further, taking a toll especially on banks and insurers' financial ground.
''It (the yen's rise) is expected to deal a heavy blow to corporate earnings'' ahead of the end of March settlements of Japan's business year, said Tadashi Okamura, chairman of the Japan Chamber of Commerce and Industry.
''We cannot bear this,'' Japan Automobile Manufacturers Association Chairman Toshiyuki Shiga said separately as a higher yen reduces exporters' overseas profits when repatriated. Shiga is also Nissan Motor Co.'s chief operating officer.
A one yen rise against the dollar reduces pretax profits of 300 major nonfinancial companies listed on the Tokyo Stock Exchange's First Section by 0.7 to 0.8 percent, according to Daiwa Securities Capital Markets Co.
''If the yen falls to the mid-70 yen level, a downswing in profits will be larger than that,'' its senior economist Yoshimasa Takashina said.
Weak post-quake stock markets are also feared to damage corporate earnings.
The 225-issue Nikkei Stock Average plummeted 10.55 percent Tuesday, its third-largest percentage decline on record, to hit 8,605.15, its lowest level since April 2009. Since then, it has recovered some of its lost ground, the Nikkei's closing level Thursday is still 14 percent lower than a week earlier, when the quake did not happen.
According to Nomura Securities Co., latent gains in stockholdings of nonfinancial 1,950 listed companies totaled 3.5 trillion yen as of Tuesday, down 60 percent from the end of March, 2010.
''There is a possibility that their latent losses could surpass 1 trillion yen for the business year ending March 2011,'' said Kengo Nishiyama, senior strategist at the brokerage firm.
