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October 15, 2010    

Japan may step in to weaken currency

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by Kay Murchie

Japan’s Prime Minister, Naoto Kan, has today said he is “very concerned about the currency situation” as the yen continues to strengthen against the US dollar.

The Japanese yen is currently hovering around 15-year highs against the dollar.

Last month, the Bank of Japan (BoJ) intervened to stem its currency against the dollar – the first time in six years that such action had been taken and the Bank is expected to intervene again following the PM‘s comments today.

The yen strengthen against the dollar today on the back of expectations that the US will shortly outline additional quantitative easing measures.

Earlier this week, US central bank, the Federal Reserve, hinted that it will provide extra stimulus to strengthen the economy.

The US central bank looks as if it will adopt measures to safeguard the recovery after minutes of the 21 September meeting said the FOMC was “prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.”

There have been concerns for the US economic recovery, after rising unemployment and a sluggish recovery.

Meanwhile, Japan’s finance minister, Yoshihiko Noda told reporters today: “We will take decisive steps when necessary, from the perspective of curbing excessive fluctuations in exchange rates.”

Japan is fearful of a strong yen as this means demand for exports has weakened – fuelling concerns for the recovery in the Japanese economy, which is the world’s second largest, and dependent on exports.

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