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EDITIONS
Friday, 31 January, 2003, 07:49 GMT
Japan's yen breaks winning streak
1000-yen notes
A stronger yen would hurt exports
After seven weeks of constant gains, Japan's currency is finally coming off the boil - much to the relief of policymakers in the stricken Asian economy.

By 0720 GMT on Friday, the yen-dollar exchange rate was 119.19, representing a slight weakening of the yen on the day and a 1% fall for the week as a whole.

The dollar has been sinking for about two months, as the possible impact of rising oil prices and war on Iraq combine with worries about the strength of the US economy in general.

But a continued slide would be dire news for Japan, where a demand-starved domestic market means exports are the key to continued survival.

And now currency traders suspect the government in Tokyo is intervening behind the scenes to keep the dollar rising.

Going down

Japanese politicians have begun to hint at the need to push the yen lower.

Finance Minister Masajuro Shiokawa was guarded in comments to the Diet (parliament), but he hinted at the need for change.

"We will continue to closely watch the currency market and take appropriate actions as needed," he told Diet members.

But he also made clear that by purchasing power parity - a measure of how much goods a given amount of currency will buy - the dollar should buy 150 yen, not 120.

Bleak picture

The need for robust exports, which a strong yen would make more expensive to potential customers, is underscored by yet more dismal economic news from the decade-long downturn at home.

Unemployment rose to 5.5% in Dcember, matching the worst level in 50 years.

The Nikkei finished slightly up on Friday, but only just above a two-decade trough.

And Prime Minister Junichiro Koizumi was forced to call for patience from the populace, admitting that after two years in the job little had yet changed.

See also:

27 Jan 03 | Business
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