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September 15, 2010    

Japan takes action to weaken yen

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by Kay Murchie
Japan takes action to weaken yen

For the first time in six years, the Bank of Japan (BoJ) has taken action to stem its currency - which has been rising against the US dollar.

Yesterday, the yen hit a fresh 15-year high against the dollar after Prime Minister, Naoto Kan, won a ruling party leadership vote, defeating Ichiro Ozawa.

The currency has been rising against the dollar over recent weeks but a stronger yen has meant demand for exports has weakened – fuelling concerns for the recovery in the world’s second largest economy.

Japan was one of the first major economies to emerge from recession – in the second quarter of 2009 – boosted by exports.

Investors, meanwhile, have welcomed today’s currency move resulting in Japan’s Nikkei share index closing up 2.9%, to 9,555.53.

In a news conference today, Japanese Finance Minister, Yoshihiko Noda, said: “We have conducted an intervention in order to suppress excessive fluctuations in the currency market.

“We will closely monitor currency developments, and take firm action including intervention.

“Our country’s economy is still in a very severe situation with continued deflation,” he added.

According to Mitul Kotecha, head of global forex strategy with Credit Agricole, the coming weeks could see further intervention from the BoJ.

There has been no immediate comment from the US Treasury about today’s move.

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