— Correcting 7th Paragraph To Say Dollar Loans, Yen Investments

TOKYO (MNI) – Japanese Economic and Fiscal Policy Minister Kaoru
Yosano said on Monday that the government does not have any new tools to
counter the negative impact of the yen’s rapid rise on the economy.

He also told reporters that the government must not ask the Bank of
Japan to underwrite Japanese government bonds, which is banned by law
but urged by some politicians as a way of easily financing fiscal
spending and reflating the economy.

“We have no new medicine,” he said, referring to what the
government can do to fight the yen’s rise. “We have to take the same
remedies (as taken in the past) to cope with the same illness.”

Yosano also said that yen exchange rates are determined in the
currency market.

As a stop-gap remedy, Japan has intervened in the market to sell
yen for the dollar to safeguard its fragile recovery from the March
earthquake disaster.

For a longer-term measure, the government said last week it will
launch a $100 billion emergency facility to cope with the appreciation
of the yen by tapping into its huge dollar reserves.

Japan’s key lending agency will make dollar loans to, or make yen
investments in, Japanese firms to cover part of their needs to purchase
overseas assets. Those firms will then have to turn yen funds into
dollars or other currencies in order to fully finance the purchases,
which would add selling pressure on the Japanese currency in the forex
market.

After a meeting among some cabinet ministers to discuss the
economic climate this morning, the government said in a statement that
it will “carefully monitor” developments in the forex market and will
“take decisive action if necessary.”

The government also said it expects the BOJ to communicate and
cooperate with the government closely, and “take policy measures in a
timely and appropriate manner.”

BOJ Deputy Governor Kiyohiko Nishimura, who attended today’s
meeting as an observer, said that the strong yen will deal a major blow
to the Japanese economy while it lowers import costs, according to
Yosano.

tokyo@marketnews.com
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