Japan steps up guard against rising yen+

TOKYO, Nov. 26 Kyodo -
Japan stepped up its guard on Thursday as the yen continued its rise against
the U.S. dollar, with Finance Minister Hirohisa Fujii saying Tokyo is
''carefully watching'' whether the ongoing currency movements are abnormal.
Prime Minister Yukio Hatoyama told reporters it is ''not preferable if foreign
exchange rates move rapidly.''
''Although the economy is not necessarily experiencing good conditions, the yen
is rising...there are tremendous difficulties,'' he said.
Still, Hatoyama said after the dollar hit a 14-year low in the lower 86 yen
range that the government must steer the economy properly to ''avoid it from
slipping into a double-dip recession'' and there is an urgent need to design
effective measures under a planned second extra budget and the budget for
fiscal 2010.
Chief Cabinet Secretary Hirofumi Hirano voiced concern that a further rise in
the yen against the dollar would adversely affect the Japanese economy.
''If the yen rises at an accelerated pace, there is no doubt there will be an
impact (on the economy),'' the top government spokesman said at a news
conference.
Hirano indicated that the government may have to map out additional steps and
change the size of the supplementary budget if the yen's gains continue to
extend against the dollar.
Hirano said he exchanged views on the possible impact of the rising yen with
Fujii and the two agreed that the government will keep close tabs on movements
in the currency market.
''We did not thrash out that far,'' Hirano said, when asked whether they agreed
that Japan may need to intervene in the market to curb the yen's rise.
Fujii told reporters at the Finance Ministry in the evening that it is still
''at the stage of determining'' whether foreign-exchange rates are moving
extraordinarily.
He said, however, that Japan will ''take appropriate measures'' if foreign
exchange rates ''move abnormally.''
''That is the way of thinking in the world and that is also Japan's view,''
said Fujii earlier in the day, suggesting Tokyo will intervene in the market if
necessary.
Japanese monetary authorities have not stepped into the currency market since
March 2004.
Fujii has attributed the dollar's recent weakness to market expectations that
the United States will maintain its low-interest-rate policy, noting that the
dollar's slump is not stemming from an increase in the yen's strength.
On Thursday, the minister said a strong dollar is in ''the national interest''
of the United States and there is no change in Japan's support for that stance.
Echoing Fujii's views, Hatoyama said the yen's rally is basically caused by the
dollar's weakness, not stemming from an increase in the yen's strength.
Fears are growing among corporate executives and policymakers that a further
rise in the yen would derail Japan's economy -- highly dependent on the
performance of the export-oriented manufacturing industry -- from recovering
from the worst recession in decades.
High-tech firms and automakers have slashed jobs and production levels to
emerge from the red, but corporate executives believe restructuring steps alone
will not be enough to keep them competitive if the yen continues to appreciate.
''The current level of the yen is extremely problematic,'' Shoji Muneoka,
chairman of the Japan Iron and Steel Federation, told a news conference. ''A
stronger yen could serve as a trigger for double-dip recession.''
Muneoka, also president of Nippon Steel Corp., urged the government to take
aggressive measures, indicating a view that market intervention is necessary to
stem the dollar's further fall.
''Unless (the yen) is brought back to a certain level in some form, there will
be severe damage to the Japanese economy,'' he said.
Japanese exporters have on average assumed exchange rates of around 90 to 95
yen to the dollar for the current fiscal year.
While many have changed their assumptions to more conservative rates for the
October-March latter half of the current fiscal year, a further rise in the yen
will heavily erode the profits they make abroad.
Toyota Motor Corp., for example, assumes the dollar will trade at the 90 yen
level in the second half. A rise of 1 yen will erase about 25 billion yen from
its operating profit on an annual basis, according to the automaker.
==Kyodo