TOKYO (MNI) – Finance Minister Jun Azumi said on Wednesday that
market interest rates on Japanese government bonds are “not high” and
remain “stable” but also warned that Tokyo cannot be complacent about
the need to embark on fiscal consolidation.

He also told the Foreign Correspondents’ Club of Japan that
“interest rates on government bonds can rise suddenly” and could topple
governments as seen in Europe recently, renewing his call for a sales
tax hike in the next few years to secure stable tax revenues.

Azumi repeated his remarks made last week after meeting his U.S.
counterpart that Japan will continue reducing crude oil imports from
Iran, which currently account for only 10% of Japan’s total crude
imports.

Fearing any repercussions, Prime Minister Yoshihiko Noda then told
reporters last week that Azumi made a “personal comment” when he said
Japan will slash Iranian oil purchases further “as soon as possible” and
that the government needs to consult business leaders first.

On U.S.-proposed sanctions against Iran for its nuclear development
program, Azumi said the MOF will begin on Wednesday bilateral
working-level talks with visiting Treasury officials in hopes of
“minimizing the damage to Japanese economy.”

Asked about Japan’s investment in U.S. Treasuries and other foreign
government bonds, Azumi said those “valuable investments” are worth
holding, but declined further comments.

In response to questions about how to respond to fluctuations in
yen exchange rates, the minister said it would be “difficult” for the
Japanese government to draw a line in the sand.

“But we will take decisive action on speculative moves as we have
in the past,” he added.

Azumi said it would be hard for Tokyo to copy the Swiss
government’s forex policy — to defend a certain level with massive fund
injections — because the yen trading volume is much larger than that
for Swiss franc.

As announced earlier, he said Japan will start buying a “certain
amount” of Chinese government bonds but didn’t say when.

Japan’s plan to purchase Chinese government debt would not mean
Tokyo is breaking away from its tradition of holding foreign securities
denominated mostly in the U.S. dollar and euro, Azumi said last month.

He has said yuan bond buying will be beneficial for financing needs
of both Japan and China as well as boosting bilateral ties.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

[TOPICS: M$J$$$,M$A$$$,M$Q$$$,MGJ$$$,M$$FX$,MT$$$$]