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Wednesday, 9 January, 2002, 07:23 GMT
Yen hits 3-year low against dollar
Piles of yen at the Bank of Japan
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.

See also:

17 Dec 01 | Business
Japan ready to bail out banks
14 Dec 01 | Business
Yen hits three-year low
12 Dec 01 | Business
Gloom increases at Japanese firms
11 Dec 01 | Business
Yen weakens as spotlight hits Japan
07 Dec 01 | Business
Japan falls into recession
26 Nov 01 | Business
Bad loans mount at Japan's banks
29 Oct 01 | Business
Bank of Japan warns of recession
26 Oct 01 | Business
Japan's consumer prices fall
25 Oct 01 | Business
Asian economies moribund
01 Oct 01 | Business
Survey raises Japan recession fears
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