Yen drops against dollar after bank acts

By Taizo Hirose
Bloomberg News Service

The yen fell against the dollar today after the Bank of Japan unexpectedly decided to add cash to the economy in what may be an effort to help slow the yen's 10 percent gain in the past year and protect an export-led recovery.

The bank's policy board decided by a majority vote to raise the upper limit of its reserve target to 35 trillion yen ($326 billion) from 32 trillion yen, the central bank said in a statement in Tokyo. More money in circulation may dilute the yen's value.

The yen traded at 107.48 at 1:03 p.m., after declining as low as 107.60. That compares with 107.25 late yesterday in New York. Traders said the step may do little to pull down the Japanese currency.

"The yen should have been much weaker, had this step made any major difference," said Tsutomu Soma, a currency trader in Tokyo at Okasan Securities Co.

Japan's currency still may rise to 105 per dollar by March, he said.

Meanwhile, Japanese stocks gained, led by Sony Corp. and Canon Inc. after the yen weakened against the dollar and Goldman, Sachs & Co. recommended investors buy more shares of computer-related companies on increasing consumer demand.

A weaker yen is "a good thing because Japan's recovery is still being supported by exporters," said Wee Ban Yew, who helps manage $3.9 billion at OCBC Asset Management Ltd. in Singapore.

For Hawai'i, a stronger yen is good because it means that the Japanese currency goes further when tourists book hotel rooms or airline flights or pay for admission to visitor attractions, encouraging more travel and more spending.

Advertiser staff contributed the information on Hawai'i.