Japanese PM vows to combat yen’s rise

October 28th, 2011 - 4:04 pm ICT by IANS  

Tokyo, Oct 28 (IANS) Prime Minister Yoshihiko Noda told parliament Friday that Japan is ready to take all measures to tackle the yen’s appreciation to record highs, suggesting further intervention by Tokyo into currency markets to cool the currency’s rise.

“A crisis of industrial hollowing continues in the wake of the historic appreciation of the yen,” Noda said in a major policy speech at an extraordinary Diet session.

The Japanese premier was referring a recent trend of large manufacturers opting to set up shop overseas, due to cheaper parts, labour and other costs, as the rapid rise of the yen has made it hard for them to compete on a global scale while based in Japan.

“If big companies move their bases overseas, their medium and small business partners will follow suit and employment that must remain in our country may disappear,” Xinhua quoted Noda as saying.

“We will take every possible measure to respond to the yen’s appreciation and other issues by working together with the Bank of Japan (BOJ),” Noda said.

The yen was trading close to a postwar high at 75.87 yen versus the US dollar in early trade in Asia, despite the BOJ Thursday deciding in a unanimous vote to hold its key short-term interest rate at between zero and 0.1 percent, as a means to counteract the yen’s rise by making it less appealing for speculators to bet on Japan’s currency as well as increasing the size of a key asset buying programme.

Both the finance ministry and the BOJ are closely watching development in the currency market as the Japanese Yen is deemed safe haven against a backdrop of sovereign debt crisis in Eurozone and the likelihood of further monetary easing by the US Federal Reserve.

Japan’s Finance Minister Jun Azumi has slammed short-term investors, claiming recent moves in money markets have been “speculative” and “one-sided” and that investors have been making large bets to achieve quick profits.

Noda said Thursday that his government will allocate 15 trillion yen ($197 billion) in funds for currency market intervention, from its supplementary budget for the current fiscal year and do its utmost to support European leaders as the crisis in the single-currency region has driven the yen higher and exerted immense downward pressure on Japan’s fragile export sector.

Noda said that he will tell the G-20 summit to be held in Cannes next month of measures Japan plans to take to help boost the global economy and support ailing European economies in particular.

The prime minister, while voicing his concern about the eurozone crisis and the slowdown in the global economy, also said that the domestic situation remained severe and that the nation must also look inwards.

“The country’s fiscal situation is in a serious state. We are asking people to share certain burdens,” Noda said.

Noda, who took office Sep 2, himself will be bearing some of the burden as the government announced Friday that he will take a pay cut of 30 percent and other ministers will have their salaries reduced by around 20 percent.

In addition the prime minister said that there will be a temporary tax hike and government-held shares in Japan Tobacco Inc. and Japan Post Holdings Co. will be sold to help finance reconstruction efforts following the March 11 disasters.

“We will gather all the possible extra-tax funding by selling government assets including Japan Post and Japan Tobacco shares,” Noda said, adding that efforts to rebuild disaster-struck areas would be intensified, as well as those to contain the ongoing Fukushima nuclear crisis.

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