ID :
203355
Wed, 08/24/2011 - 18:19
Auther :
Shortlink :
https://oananews.org//node/203355
The shortlink copeid
Japan unveils $100 bil. program to ease impact of rising yen
TOKYO, Aug. 24 Kyodo - The Japanese government on Wednesday announced a $100 billion program to encourage private-sector firms in the country to exchange their yen funds for foreign currencies, as part of efforts to ease the negative impact of the yen's recent sharp rise on the economy.
The one-year, emergency program, which came as Tokyo has so far failed to sufficiently weaken the Japanese currency through market interventions, is designed to prompt mergers and acquisitions by Japanese companies abroad, making the best use of the higher value of the yen against the U.S. dollar, the euro and other major currencies.
The program is part of a policy package urgently unveiled by the government, which also includes requesting foreign exchange market dealers to report their trading positions, effective through the end of next month.
''I hope this will help to address the one-sided strength of the yen,'' Finance Minister Yoshihiko Noda told reporters.
Under the program, the government will extend up to $100 billion in cheap loans to the Japan Bank for International Cooperation, which in turn will provide credit lines to commercial banks in the country, aiming to encourage those banks to lend more to Japanese firms in need of cash to invest in foreign companies or secure natural resources abroad.
JBIC will contribute 150 billion yen ($1.96 billion) to the scheme, while separately collaborating with domestic banks to establish an investment fund that would help exports by smaller companies, which have increasingly seen the stronger yen erode their global competitiveness.
With the government extending strategic funds in dollars from its special budget account, which is normally used for currency market interventions, the program is expected to spread some ''pump-priming effects'' through private-sector companies and drive them into selling more of their yen holdings in the market for foreign currency funds, the Finance Ministry said.
The emergency program is expected to help supplement the capacity of Japanese banks, which normally face difficulties in raising huge amounts of dollar funds in the Tokyo money market.
Noda indicated the government could expand the program later.
As for the requirement related to currency market traders, the government will soon urge them to report their foreign exchange positions to the ministry every day through September.
The move came as the government and the Bank of Japan have been attempting to figure out bets by hedge funds and other investors who seek short-term profits, which often cause excessive volatility in the market.
But the reporting rule, based on a law with punitive clauses, will only be applied to major financial institutions operating in Japanese markets and is therefore unlikely to provide the authorities with the whole picture.
Japanese monetary authorities stepped into the currency market on Aug. 4 to sell the yen for the dollar, Tokyo's third such move in a year. But the yen has since strengthened beyond levels seen prior to the intervention and last Friday briefly appreciated to a postwar record of 75.95 yen against the dollar.
Noda said the ministry and the central bank will continue to closely watch the foreign exchange market and take ''decisive action'' when it proves necessary, suggesting additional intervention.
The dollar was trading at around 76.60 yen in Tokyo on Wednesday, little changed from overnight in New York, with dealers almost shrugging off the announcement by the government.
The one-year, emergency program, which came as Tokyo has so far failed to sufficiently weaken the Japanese currency through market interventions, is designed to prompt mergers and acquisitions by Japanese companies abroad, making the best use of the higher value of the yen against the U.S. dollar, the euro and other major currencies.
The program is part of a policy package urgently unveiled by the government, which also includes requesting foreign exchange market dealers to report their trading positions, effective through the end of next month.
''I hope this will help to address the one-sided strength of the yen,'' Finance Minister Yoshihiko Noda told reporters.
Under the program, the government will extend up to $100 billion in cheap loans to the Japan Bank for International Cooperation, which in turn will provide credit lines to commercial banks in the country, aiming to encourage those banks to lend more to Japanese firms in need of cash to invest in foreign companies or secure natural resources abroad.
JBIC will contribute 150 billion yen ($1.96 billion) to the scheme, while separately collaborating with domestic banks to establish an investment fund that would help exports by smaller companies, which have increasingly seen the stronger yen erode their global competitiveness.
With the government extending strategic funds in dollars from its special budget account, which is normally used for currency market interventions, the program is expected to spread some ''pump-priming effects'' through private-sector companies and drive them into selling more of their yen holdings in the market for foreign currency funds, the Finance Ministry said.
The emergency program is expected to help supplement the capacity of Japanese banks, which normally face difficulties in raising huge amounts of dollar funds in the Tokyo money market.
Noda indicated the government could expand the program later.
As for the requirement related to currency market traders, the government will soon urge them to report their foreign exchange positions to the ministry every day through September.
The move came as the government and the Bank of Japan have been attempting to figure out bets by hedge funds and other investors who seek short-term profits, which often cause excessive volatility in the market.
But the reporting rule, based on a law with punitive clauses, will only be applied to major financial institutions operating in Japanese markets and is therefore unlikely to provide the authorities with the whole picture.
Japanese monetary authorities stepped into the currency market on Aug. 4 to sell the yen for the dollar, Tokyo's third such move in a year. But the yen has since strengthened beyond levels seen prior to the intervention and last Friday briefly appreciated to a postwar record of 75.95 yen against the dollar.
Noda said the ministry and the central bank will continue to closely watch the foreign exchange market and take ''decisive action'' when it proves necessary, suggesting additional intervention.
The dollar was trading at around 76.60 yen in Tokyo on Wednesday, little changed from overnight in New York, with dealers almost shrugging off the announcement by the government.
