Japanese Yen rise vs Euro concern

 Japan’s economy minister said the Yen’s strength against the Euro is a concern because it weighs on the export- reliant economy, but he didn’t signal any imminent action.

“Of course we are concerned about it as moves have been rapid for us,” Minister of State for Economic and Fiscal Policy Motohisa Furukawa said in an interview with The Wall Street Journal and Dow Jones Newswires.


With the Euro losing more than 10% of its value against the Yen since the start of November, investors began to speculate whether Japan would buy the Euro via currency intervention, in addition to the large-scale Dollar-buying Japan has done since 2010. But comments from Mr. Furukawa suggested Tokyo isn’t considering the Euro intervention, at least not in the near term.


“We need to monitor the market going forward,” he said. The minister isn’t directly responsible for ordering the Bank of Japan to stage currency intervention. Still, he is a main figure in the current administration of Prime Minister Yoshihiko Noda and overseas economic growth that is affected by the strong Yen.


Finance Minister Jun Azumi, who has the right to signal the BOJ to intervene, made comments in line with Mr. Furukawa’s. “I’d like to carefully examine current movements in the exchange rate,” Mr. Azumi said at a routine news conference. The recent Euro moves are a headache to Japanese exporters already struggling with the dollar trading close to its all-time low against the Yen.


Analysts say the exporters as a whole do business with overseas partners mostly in Dollars. For this reason, ways to hedge Euro exchange-rate risks are limited compared with those for Dollar rate risks, leaving companies that trade mostly with Europe struggling to cope with the Euro’s moves. “For some companies, the current Euro rate is about ¥10 lower than expectations, and no doubt it’s negatively affecting corporate

profits,” he said.


One reason behind the recent yen strength is investor demand for a safe-haven amid the European debt crisis. Mr. Furukawa said the sovereign problem is weighing on the Japanese economy via other channels as well, including effects from the Chinese trading a lot with Europe.


“If China slows down, we can’t be free from the impact, as it’s now our biggest trading partner,” he said. Earlier in the day, the government released its monthly economic report, which maintained the overall assessment. But it cut its view on exports because “exports to Asia have been weakening.” 


Meanwhile, China said its gross domestic product expanded 8.9% in the fourth quarter last year, compared with 9.1% growth in the previous period. Mr. Furukawa said Japan remains committed to helping stem Europe’s spreading debt crisis to restore market confidence in the region.

“To stabilise the crisis, fragmented efforts by individual counties won’t work any more, and we need an international framework to support Europe,” he said.


A Japanese government official said earlier in the day that it purchased 8% of six-month debt issued by the European Financial Stability Facility despite the recent downgrade of the debt’s rating by Standard & Poor’s. 


While Mr. Furukawa didn’t make specific policy requests to European counterparts, he said that Europe may want to consider beefing up countermeasures if nessary and that he is “watching all the development even closer than ever.”