Tokyo, Dec 1: The Bank of Japan portrayed itself as a team player in the government's fight against the high yen on Wednesday, saying its present easy monetary policy also seeks to tame the Japanese currency. The central bank, criticised in recent months for opacity and stubbornness in not easing policy further, stepped up its PR offensive, rejecting arguments that it was not doing enough to help the Ministry of Finance halt the yen's rise. It also left open the possibility of further action if the yen surges further."The Bank of Japan supports the recent action by the Ministry of Finance in the foreign exchange market and strongly hopes that market stability is restored as soon as possible," BOJ Governor Masaru Hayami said in a rare statement, referring to Japan's yen-selling market interventions on Monday and Tuesday. Hayami said the central bank has been providing ample funds to the market, but again signalled flexibility in dealing with any further market turmoil. The BOJ, he said, was prepared to "prepared to promptly provide sufficient funds" to keep the market stable, "taking account of the government's yen funding of foreign exchange intervention and any disruptive impact of excessive movements in the foreign exchange market on domestic Financial transactions."
The BOJ since February has driven short-term interest rates essentially to zero by pumping yen into the Tokyo money market as a means to support the tentative economic recovery.
It has repeatedly rebuffed pressure, at Times overtly applied by the government, to take further, radical easing measures. But minutes of the Policy Board's policy meetings show that the bank was strongly concerned about the high yen even when it refused to change policy earlier this year.
The bank released Hayami's statement just moments after it"sterilised" Monday's intervention, mopping up the excess yen left in the banking system from the authorities' yen sales. Instead, the BOJ used its regular morning operations to leave the same daily fund surplus it has left in the market since May. That move had been widely expected, but some in the markets held out expectations that the BOJ would leave the intervention "unsterilised" in an attempt to weaken the yen's value through oversupply.
Hayami's statement briefly caused confusion in foreign exchange markets and lifted the dollar to 102.55 yen as some traders wondered if he had signalled a further credit easing. But the dollar later slipped back to finish the Tokyo session at around 102.11 after a senior BOJ official effectively quashed speculation of an easing during a briefing with reporters.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.