Yen reaches eight-month high against dollar
The yen hit 88.23 against the dollar today – the highest level since January when the currency hit a 13-year high of 87.10 per dollar.
However, while a strong yen is good news for the economy, it makes Japanese exports less competitive – but means imports are more affordable to Japanese consumers.
Earlier this month, BoJ Governor, Masaaki Shirakawa, said: “To give our general view on the yen, the short-term impact of a stronger yen would be to lower prices,”
“It is possible for a stronger yen to support the economy in the long run, the Governor added.”
However, the rise of the yen today hit the shares of many exporters.
Honda Motors and Kyocera, the electronic parts maker, saw their shares fall today, while the benchmark Nikkei index lost 256.46 points to close at 10,009.52 – its lowest level in almost two months.
Meanwhile, Finance Minister Hirohisa Fujii recently said a strong yen had merits, however he has since backed down from this claim after the rise gathered momentum.
However, many experts believe the strengthening of the yen came after comments suggesting that the likelihood of Japan intervening to weaken its currency had receded.
Over recent years, Japan has intervened to weaken the yen after the Government thought its increase was at risk of affecting growth in the economy.
The Government has not stepped in since March 2004 but many central banks do intervene in foreign-exchange markets by selling and buying currencies.
However, the Finance Minister said he is opposed to weakening any currency and will not be stepping into the currency market to stem the yen’s rise against the dollar.
Mr Fujii was quoted as saying: “It would be a mistake to artificially influence foreign exchange rates.”