Hatoyama orders measures to tackle currency, stock market issues

Monday 30th November, 06:44 AM JST

TOKYO —

Prime Minister Yukio Hatoyama ordered cabinet ministers on Sunday to include measures aimed at coping with the yen’s rapid appreciation and the decline in the Japanese stock market in a supplementary budget for fiscal 2009.

Hatoyama issued the order at a meeting with Finance Minister Hirohisa Fujii and other key figures of his government, where they shared a view that fresh, swift measures are necessary to stave off adverse impact on the Japanese economy of the currency and stock market situations.

Those who attended the meeting were concerned that the yen’s recent rise could deal a severe blow to exporters and the country’s economy on the whole, and agreed to come up with countermeasures in the second fiscal 2009 supplementary budget currently being formulated.

The new extra budget has been expected to be worth around 2.7 trillion yen, but its size is likely to increase if it features such market measures.

Deputy Prime Minister Naoto Kan, Chief Cabinet Secretary Hirofumi Hirano and administrative minister Yoshito Sengoku also attended the meeting, which was called by Hatoyama.

The move comes as the yen rose to levels against the dollar unseen in 14 years with the U.S. currency having briefly fallen to the 84-yen range, triggered by concerns over financial trouble in the Middle Eastern emirate of Dubai. The currency market turbulence led share prices in Tokyo to tumble with the key Nikkei stock index shedding over 3% on Friday.

According to officials familiar with the discussions at the meeting, Hatoyama demanded that given the current market situations, fresh measures be worked out in addition to employment, environment and economic measures being considered as part of the supplementary budget.

Hatoyama asked the other participants to be alert for Monday’s market moves, they said. Hatoyama is scheduled to meet with Bank of Japan Governor Masaaki Shirakawa by next weekend.

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8 Comments

DeepAir65 at 07:51 AM JST - 30th November

only took 6 weeks to do their first about face - not saying they are wrong but when they came to power they said they were happy to let the yen make it's own way.
bisoy at 08:05 AM JST - 30th November

stopping a leak with a bandaid?
Scrote at 09:39 AM JST - 30th November

Why is the government trying to manipulate the stock market?
herefornow at 10:38 AM JST - 30th November

Respectfully, this is all just re-arranging the deck chairs. The major economic news yesterday was that the finance ministry finally, officially, confirmed what everyone already knew -- that tax revenues will only be about JPY 38.0 trillion for fiscal 2009, which means that they'll have to borrow another JPY 57.9 trillion or so to meet the budget requests of JPY 95.0 trillion. Obviously, that is an unsustainable situation. J-land has ignored their serious economic and demographic problems way too long, and no amount of tinkering with exchange rates is gonna save it.
GJDailleult at 12:20 PM JST - 30th November

As long as the US dollar keeps falling there isn't much of anything they can do about the yen.
poollymook at 02:02 PM JST - 30th November

Tell him to borrow some of that deficit yen from mama!
apecNetworks at 04:59 PM JST - 30th November

Let's be abit more alert on Dollar/Yen exchange volatility this time, rather than that mess that occurred in the mid 1990's. Bank of Japan should be on "red alert" as the Yen dropped. BOJ better remember that the last line of defense was the major Japanese banks, and it was weak then. Japan doesn't want anything close to what happened back then.

I do not know the repercussions of taking the Yen off the float, but until the forex is more stable, I would prefer that the Yen be pegged at 100+yen. This is my own personal preference. Former PM Aso should be consulted.
sfjp330 at 06:17 AM JST - 1st December

The Nikkei is heavily influenced by the manufacturers and exporters, and those are the companies that are going to get hit by the appreciation of the yen. This is very bad news for Japan. And even Japanese financial firms, which were largely thought to be holding up better than many of their U.S. and European rivals, are starting to feel the strain of the credit crunch. None of this is good news for the rest of the world.The best indicator of the future at the moment is the value of the yen. If it stabilizes, we are likely to be okay and the markets will recover. Bank of Japan and other developed nations are might consider some sort of intervention to slow the yen's rally. The Bank of Japan could sell yen and buy dollars for example.

There might be a possibilty that central banks in Europe could also lower rates as well. If that happens, investors may, at least temporarily, be willing to put money back in riskier securities, such as stocks. And that could help stall the yen's climb.

If every other major country lowers their rates aggressively, that would help because the yen would no longer stand out as having the lowest short-term rates. Problems is that intervention may not be enough to stop the yen, since so many hedge funds and other big investors still have positions to unwind related to the carry trade.The continued stronger yen leads to more pain for the major Japanese exporters.