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Wednesday, August 19, 1998 Published at 13:42 GMT 14:42 UK

Business: The Economy

Japan moves to prop up the yen

Japanese traders have witnessed another slide in the yen

Japan's Vice Finance Minister, Eisuke Sakakibara, has said that his government is close to intervening to support the country's currency, the yen.

The value of the yen has tumbled over the last few weeks, amid heightened fears that the government will struggle to solve Japan's huge economic problems.

However news of the possible intervention bolstered the Japanese currency, which rose to trade at less than 144 yen against the US dollar, up from almost 146 to the dollar on Tuesday.

[ image: Traders reacted positively to the news]
Traders reacted positively to the news
Mr Sakakibare, better known as "Mr Yen" for his influence on currency markets, said: "Yen-supporting intervention is likely to happen soon."

One Japanese dealer said: "Given his strong influence of the foreign exchange rate, his comments suggesting immediate intervention pushed the yen."

Analysts are concerned that Japan faces an uphill struggle to put an end to the country's banking system problems.

Japan's financial institutions are straining under a mountain of bad debts.

Bank of Japan governor Masara Hayami proposed on Wednesday the use of public money to prevent a major bank collapse.

"There is a good possibility for a merger or injection of capital to keep (major banks) from collapsing and the government is ready to provide funds," Mr Hayami said.

Mr Hayami highlighted the tough battle that the government has to turnaround the ailing economy by saying that the economic conditions in Japan are, on the whole, becoming worse.

He said that companies and households are losing confidence over future economic prospects.

Japan and the US joined forces to prop up the yen in June which helped it strengthen from an eight year low to trade at less than 140 against the dollar.

News of another possible intervention by Japan on the currency markets helped spark a rally in Japanese shares and Asian currencies on Wednesday.

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