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Market awaits Newmont''s counterbid for Placer Dome to maintain industry ranking
Recent Dollar/Yen Moves Are in Line
With Fundamentals, Finance Minister Says
By Yoko Nishikawa
Reuters
Tuesday, November 1, 2005
http://today.reuters.com/news/newsArticleSearch.aspx?
storyID=80066+01-Nov-2005+RTRS&srch=Tanigaki
TOKYO -- Japanese Finance Minister Sadakazu Tanigaki said on Tuesday
dollar/yen exchange rates have been in line with economic
fundamentals but still needed to be closely watched as the
currencies were moving more than in the past.
Tanigaki declined, however, to comment on whether he regarded recent
dollar/yen moves as rapid, or to speak about specific currency
levels.
"They are moving largely in line with economic fundamentals,"
Tanigaki, who was reappointed as finance minister in a cabinet
reshuffle on Monday, told a group of reporters when asked about the
dollar's rise to a two-year high against the yen.
But he added: "They are moving more than in the past, so we need to
carefully watch them."
By late afternoon in Tokyo the dollar was around 116.50 yen after
having surged through suspected option barriers near that level to
116.68 yen on electronic trading system EBS earlier in the day, its
highest since September 2003.
Asked what was meant when Japanese currency authorities said the
Ministry of Finance (MOF) would "take appropriate action as needed"
at times of yen weakness, Tanigaki said: "That is a delicate
question. ... I cannot clearly comment on that."
Financial players usually interpret the phrase to mean the MOF is
ready to intervene in the market.
But ministry officials have recently dropped the reference to
taking "appropriate action as needed" when asked about the yen's
decline. A similar statement by Vice Finance Minister Koichi
Hosokawa in mid-October prompted some speculation that Japan could
intervene to stop the yen's fall.
The MOF said on Monday that currency authorities refrained from
intervening in the currency market from Sept. 29 to Oct. 27, marking
the 19th consecutive month that Japan had stayed out of the market.
The last time the MOF conducted yen-selling intervention was on
March 16 last year, when the dollar fell nearly two yen on the day
to around 108.60 yen.
But the last time the ministry intervened to stop a fall in the yen
was in June 1998, when it dropped to around 146 yen to the dollar.
Lately officials have been reiterating that the ministry would
carefully monitor currency movements and that currencies needed to
reflect economic fundamentals and move stably.
Tanigaki was also cautious when asked about growing talk on how and
when the Bank of Japan would end its ultra-easy monetary policy,
repeating that Japan's economy was still in mild deflation.
In a twice-yearly outlook report on Monday, the BOJ raised its
forecasts for prices and economic growth and said chances of a
policy shift would grow over the course of the fiscal year starting
next April.
"I think it is good to have various discussions. But what we are
interested in most is what is happening now. Mild deflation remains
and we need to continue making efforts to overcome it."
Japan's economy has been plagued by more than seven years of
deflation. But with consumer prices expected to start rising in
coming months, financial markets believe the central bank could
abolish the four-year-old "quantitative easing" framework of
flooding the banking system with funds as early as the first half of
next year.
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