Summit revelation sends yen plunging

Associated Press

NEW YORK — The yen plunged to a 30-month low against the dollar after a top Japanese official said the United States had considered reaching a pact with Japan to lower the yen at their summit meeting in Washington earlier this month.

"A 'weak yen' pact was discussed within the U.S. government, but it never reached the table (at the summit)," Japan's economic and fiscal policy minister, Taro Aso, said yesterday.

Aso, who had accompanied Prime Minister Yoshiro Mori to Washington, was quoted by the Kyodo News Agency as saying Wednesday that a reference to the weak yen was deleted from the summit's joint communique because of White House concerns that such a statement might imply the U.S. government approves of its ballooning trade deficit.

Aso's statement, combined to a string of anemic data out of Japan and the Nikkei's weakness, triggered a powerful dollar rally against the yen yesterday.

The dollar quickly broke above the key levels of 124, 125 and 126 yen before rebounding back to close the New York session at 125.52 yen, up from 123.59 yen late Thursday.

Later, however, the dollar broke through the 126 yen level again to hit a high of 126.27 yen, its highest level since Oct. 7, 1998.

"(With) the summation of decade-long Japanese policies that have failed to correct the financial situation of the country and stimulate the economy, Japan's problems continue to compound to a level that has brought the current crisis," said Chuck Spence, head of foreign exchange sales at ING Barings Capital Market.

"A weak yen will certainly help with the (Japanese) exporting economy, which is important because the domestic economy just doesn't seem to stand on its own."