Page last updated at 11:32 GMT, Thursday, 7 January 2010

Japan Finance Minister Naoto Kan calls for weaker yen

Naoto Kan
Naoto Kan was named Japan's new finance minister on Wednesday

Japan's newly appointed finance minister Naoto Kan has called for a weaker yen in order to aid the recovery of the Japanese economy.

Speaking the day after his appointment, Mr Kan said it would be "nice" to see the currency weaken.

His predecessor, Hirohisa Fujii, who stepped down for health reasons, was criticised for tolerating a strong yen, which hurts Japan's exporters.

Japan is currently battling the threat of deflation and a large public debt.

Mr Kan said he would seek to work with Japan's central bank on the issue, prompting speculation that he might order official intervention.

"I will deal with it seriously and work hard to bring it to the appropriate level, considering the impact that foreign exchange has on the Japanese economy," Mr Kan told reporters.

An appropriate level would be about 95 yen to one US dollar, he said, making a rare public comment by a government minister on the currency's desired value.

ANALYSIS
Roland Buerk
Roland Buerk, BBC News, Japan
Japan's recovery is frail, made vulnerable by worsening deflation.

Exporters, still suffering a hangover from the global recession, are being laid low by the strong yen.

There are fears in government of a possible return to recession, which it cannot afford as it faces upper house elections in July.

The other big issue is the national debt.

It is pushing towards 200% of GDP, by far the highest in the industrialised world.

The yen dropped against the dollar on foreign exchange markets to 92.8 following his remarks, from 92.2 before he spoke.

The yen has dropped steadily since reaching a 14-year high against the dollar of 85 in November.

Japan has not intervened in the currency market for several years and Mr Kan's predecessor, Mr Fujii, had spoken against weakening the yen to help exporters.

Mr Kan was appointed to the post on Wednesday, after Prime Minister Yukio Hatoyama reluctantly accepted Mr Fujii's resignation.

Mr Fujii, 77, has been treated in hospital for high blood pressure.

He had told reporters he was exhausted after weeks of wrangling within Japan's governing coalition to finalise the budget.

The change of faces in such a key post is being seen as a severe test for Mr Hatoyama - who came into power in September after nearly 50 years of conservative rule and is already suffering from falling ratings.

Mr Fujii's departure has added to uncertainty about the new government's ability to handle the economy.

Parliament reconvenes the week after next with the budget at the top of the agenda.

Double dip risk

Mr Kan has headed a national strategy unit that sets fiscal priorities but he has nothing like the budgetary experience of Mr Fujii, says the BBC's Roland Buerk in Tokyo.

The question for bond markets is whether he will be able to resist pressure for more government spending, especially if Japan's economy sags towards a double dip recession, our correspondent says.

The 63-year-old Mr Kan's previous experience in government is as a health minister in the mid-1990s. He is also currently the deputy prime minister.

Analysts are questioning whether he will be able to stem Japan's deflation and massive government debt.

The world's second largest economy is currently recovering from its worst recession in decades, with public debts worth about 200% of annual economic output.



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FROM OTHER NEWS SITES
Telegraph Japan braves bond markets with high-risk plans - 4 hrs ago
AFP via Yahoo! Japan finance chief hints at action on yen - 5 hrs ago
France24 Japan finance minister: will act on yen if needed - 7 hrs ago
BusinessWeek Kan Says Markets Should Set Currencies, Reserves Right to Act - 8 hrs ago
Business World New Japanese finance ministers call for weaker yen spooks forex market - 19 hrs ago



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