Japanese intervention weakens Yen

Japan on Wednesday intervened in currency markets for the first time since 2004, in an attempt to reverse the rise of the Yen and facilitate economic recovery.

Japan Prime Minister Naoto Kan Reuters

The yen fell to a low of 85.52 to the dollar following the yen-selling intervention, which was triggered by the Japanese currency's earlier surge to a 15-year high of 82.86.

Prime Minister Naoto Kan said the yen had "reached the stage where we could not leave it untouched. So, we intervened."

“This is a very difficult decision for the Japanese government, since the G20 said that countries should refrain from intervention,” Citibank foreign exchange analyst Osama Takashima told RFI.

Finance Minister Yoshihiko Noda said the move was made unilaterally to preserve the country’s economy, the stability of which is harmed by the yen’s appreciation.

“Such an economic stimulus package... is a message that the Japanese government is coping with the economic slowdown," Takashima added.

A strong yen puts many Japanese exporters at a disadvantage against foreign rivals as it erodes their competitiveness, while making imports cheaper, thus prolonging a continued cycle of deflation.

A recent government survey suggested many companies were considering moving production overseas if the yen stayed high.

Before the intervention, the currency was still below its all-time high of 79.75 to the dollar in April 1995.

The United States weighed in on the Japanese government's move, with US Democratic Representative Sander Levin calling the yen intervention "deeply disturbing."

"China is not the only country with a predatory exchange rate policy," said Levin, the chairman of  the House of Representatives Ways and Means Committee, that has power over taxes and trade policy.