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Wednesday, 9 January, 2002, 07:23 GMT
Yen hits 3-year low against dollar
![]() The yen has been weakening steadily for months
The yen has fallen to a three-year low against the dollar, in a sign that the Japanese government may be hoping to export its way out of recession.
The dollar posted its biggest one-day gain against the yen since September on Tuesday, momentarily reaching a value of 132.79 yen, the Japanese currency's lowest level since late 1998. In Tokyo trade on Wednesday, the yen recovered slightly and by mid-afternoon was trading at 132.58 yen to the dollar. The yen's sharp fall came after Japanese economy minister Heizo Takenaka signalled that his government does not intend to intervene in order to support the sliding currency. "I myself do not think that the current exchange rate is misaligned with the fundamentals of Japan," he said after a meeting in Washington with US economics officials. And in Tokyo, the Chief Cabinet Secretary Yasuo Fukuda said the government could tolerate the dollar at 133 yen, although he cautioned against a steep fall in the value of the currency. Export boost The decline in the yen, which has now been weakening steadily for months, makes Japanese exports cheaper, and hence more competitive. Mr Takenaka's comments were interpreted as a signal that the Japanese government believes that the weak yen could lift the country's stagnant economy by boosting exports. Japan is mired in its second recession in three years, caught in a deflationary spiral as consumers, unnerved by rising unemployment, continue to rein in spending. Analysts said the weak yen will boost exports, and will also help Japan's flagging stock market by boosting the yen value of Japanese companies' overseas assets. But they stressed that a weak yen policy also has a downside. "The other side of the coin is that the depreciation of the yen will put up material import prices in Japan, and may well tip some Japanese companies that are on the knife-edge at the moment into bankruptcy," Paul Chertkow, head of global currency research at Tokyo Mitsubishi bank in London told the BBC's World Business Report. Japan's export drive will be limited by the ongoing economic downturn in the US and Europe, but is likely to steal market share away from its Asian rivals. Earlier this week, the Korean and Chinese governments both expressed concern at the impact of the weak yen on their exporters. |
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