Yen's rapid rise against dollar sets off alarms in Japan

Associated Press

•	"The yen's recent gains have been too sharp. It's bad for the economy." Yasuo Fukuda, Japan chief Cabinet secretary

The dollar, which was trading at 109.60 yen here late yesterday, briefly sank to a three-year low 109.35 yen in trading Tuesday in New York on worries about expanding U.S. trade and current account deficits.

The yen's appreciation against the dollar worries Japanese business leaders and politicians because it makes the nation's exports more expensive overseas, thus hampering Japan's fledgling economic comeback.

For Hawai'i, a stronger yen is good news since it means that the yen goes further when tourists book hotel rooms or air fares or buy tickets to visitor attractions, encouraging more travel and spending here.

The main downside for Hawai'i is that a stronger yen eventually could make goods imported from Japan more expensive for U.S. residents. Japan's top government spokesman said the rise wouldn't be tolerated.

"The yen's recent gains have been too sharp. It's bad for the economy," chief cabinet secretary Yasuo Fukuda told a news conference. "We will respond to excessive moves. We will take decisive steps."

To stem the yen's rise, Japan has repeatedly sold yen on the foreign exchange market this year, including a colossal 4.46 trillion yen outlay in September.

Zembei Mizoguchi, Japan's vice finance minister for international affairs, said it was important to maintain a stable exchange rate and avoid wild fluctuations. Over the course of September alone, the dollar fell 6.3 percent against the yen from 117.72 yen on Sept. 8 to 110.30 yen by the end of the month.

"As we have said in the past, overshooting and volatility are not good," Mizoguchi said. "We are watching the market closely and are ready to act if needed."

Ryohei Muramatsu, a currency watcher at Commerzbank's Group Treasury Asia, said the Ministry of Finance would likely try to slow the yen's appreciation rather than hold the exchange rate at a given level.

Japan's massive yen sales have contributed to the country's racking up a record high foreign exchange reserve of $604.87 billion in September, according to the Finance Ministry.

For the first nine months of the year, Japan's foreign exchange interventions totaled 13.483 trillion yen ($121.5 billion), topping 1999's full-year record of 7.64 trillion yen, it said.

Japan's foreign reserves are the largest in the world. China was in second place as of June, the latest month for which comparable data are available, with $352.3 billion to Japan's $538.3 billion, the ministry said.

Advertiser staff contributed the information on Hawai'i in this report.