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Sunday, September 26, 1999 Published at 16:45 GMT 17:45 UK


Business: The Economy

G7 express concern on yen rise

The growing strength of the yen has seemed unstoppable

The Group of Seven finance ministers have expressed concern about the potential impact of the rising yen, but have stopped short of promising intervention to limit its rise.

The statement issued after the G-Seven meeting said that Japan would take measures to stimulate its own domestic economy but it did not promise the co-ordinated action to weaken the yen that Japan had hoped for.

It said the G-Seven nations would monitor developments in exchange markets and cooperate as appropriate.

Observers have interpreted the statement as a signal of a potential change of policy by the Bank of Japan ( BOJ).

The BOJ last week refused to ease monetary policy to dampen the yen and this statement - which places the onus on Japan to stimulate the economy - is thought to signal a new willingness by the bank to pump more cash into the economy. This may result in a weaker yen.

While Japan had hoped for intervention to hold down the value of the yen, the US is reluctant to take any action that would make Japanese imports cheaper again.

The G-Seven ministers said the outlook for the world's economies was promising, with signs of renewed growth in Asian economies and signs of improvement in Europe.

The G-Seven talks are taking place before the annual meetings of the World Bank and International Monetary Fund.

BOJ wait

The yen is expected to continue its rise, prompting weaker Japanese stocks, until it becomes clear what the Bank of Japan's intentions are, analysts say.

Mr Masatoshi Moriyama, a senior analyst at Sanwa Research Institute Corp., said the possibility of concerted intervention seemed to have faded.

"At the start of the trading week, the yen is expected to go higher while stocks lose more ground," he said.

The Group of Seven meetings between the heads of state of Germany, France, Italy, the UK, the United States, Canada and Japan were originally designed to find a way to make the world's currency system more stable.



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