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Tuesday, February 16, 1999 Published at 21:01 GMT

Business: The Economy

Japan surprises world markets

Japan's Finance Minister Kiichi Miyazawa finds it's a headache running an economy

The Japanese Government has surprised the world's financial markets by publicly encouraging a fall in the value of the yen.

Japan's Ministry of Finance has indicated it would let the yen fall in line with an interest rate cut by the Bank of Japan.

Previously it had supported a strong currency despite criticism which said it needs a weaker yen to help the country get through its worst post war recession.

"It is natural for the yen to depreciate on monetary easing. We welcome this," said the vice finance minister for international affairs Eisuke Sakakibara.

Mr Sakakibura also said the US and the rest of Japan's partners in the Group of Seven world economic powers could tolerate a weakening of the yen as a result of the Bank of Japan's credit easing.

Yen's role

The value of the yen has been significant politically, as well as being economically important.

The Chinese authorities have signalled in the past that if the yen were to lose value they too may have to consider devaluing.

That could throw any attempt to stop the contagion of recession spreading from Asia and Latin America to Western Europe and the US.

Even cheaper Chinese goods flooding the world markets would hit its trading competitors.

Bank of Japan governor Masaru Hayami has also welcomed the yen's fall to around 117 to the dollar.

His bank is looking to increase its money supply too in tandem with a recent interest rate cut, to 0.15%.

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