Japan’s Prime Minister, Naoto Kan again threatened to intervene in currency markets to try and cap the strong yen. "The government and the Bank of Japan carried out foreign exchange intervention. We are going to take firm measures if necessary from now on," Kan said in a speech in parliament on Friday.
Japan broke a six-year hands-off from the currency markets to intervene on September 15 after the yen hit a 15-year high against the US dollar, reaching 82.86. The move was ordered to try and safeguard Japan’s economic recovery, which is still fragile by all measures.
Japan remains mired in deflation, with figures for August showing consumer prices had slid 18 months in a row. However with a significant trade and current account surplus, analysts argue that this is not sufficient reason to intervene in the currency.
The Japanese government is mounting pressure on the Japanese Central Bank to act on the currency issues, with the bank reportedly saying that more monetary easing measures are on the cards to try and support the Japanese economy, which is under threat from a strong yen.
Kan, who is fiscally focused, has commented that, "If we leave the current public finance situations as they are, we will not be able to continue to do so at some point." Parliament
are set to vote on a new budget bill focusing on economic growth, employment,
deregulation, social welfare and the stimulation of regional economies. The new
budget bill was ordered by Kan to try an finance new economic strategies.
