TOKYO (MNI) – Japanese Finance Minister Yoshihiko Noda on Wednesday
said excessive fluctuations in foreign exchange rates would hurt
economic growth and financial system stability but also vowed not to
guide forex rates in any direction.

Markets misinterpreted comments made last year by then-finance
minister Hirohisa Fujii, who sounded as if he would tolerate the
appreciation of the yen against major currencies, Noda told reporters in
his first interview Wednesday after assuming the post the day before.

“He (Fujii) was referring to an international call for avoiding
competition among countries in lowering the value of their currencies,
and he was not talking about guiding exchange rates in a certain
direction. My position is the same,” said Noda.

“Excessive changes (in foreign exchange rates) would have an
adverse effect on the economy and financial stability. Based on this
view, our stance is to watch the markets closely,” he said.

He declined to comment on how current yen exchange rates will
affect Japan’s exports or imports.

Before stepping down as finance minister for health reasons in
January, Fujii made comments that were interpreted to suggest that he
was calling for a stronger yen. He denied it, but did say it was wrong
to look at only the advantages of a weaker yen.

Then-deputy prime minister Naoto Kan, who replaced Fujii, later
said excessive forex moves would not be desirable for Japan’s sustained
growth and suggested that Japanese exporters favor the current dollar
level around Y90.

Noda said the Bank of Japan’s credit-easing and liquidity-injecting
policy measures aimed at fighting deflation “have been flexible and
appropriate.”

Asked about the BOJ’s loose goal that Japan’s annual inflation
should settle somewhere above zero and under 2% in the long term, Noda
replied; “In effect, the BOJ has a guideline for a desirable inflation
rate between zero and 2%, with its mid-point at around 1%. I think it’s
appropriate.”

The BOJ leadership argues that adopting a rigid inflation target
would be harmful to flexible monetary policymaking.

Noda said he agrees with Kan’s view that, on average, the long-term
inflation rate should be a little over 1% in Japan.

“I think the Japanese public’s sense of prices has changed from
favoring sub-zero inflation to just above zero, so if you count this
factor in, the mid-point of a desirable rate should be a little over
1%,” Noda explained. “But I would not impose my idea on the BOJ.”

He said the government and the BOJ share the goal toward overcoming
deflation as a crucial issue for Japan’s self-sustaining economic
growth.

Naoto Kan took over from Yukio Hatoyama, who resigned as prime
minister last week after failing to deliver the key election campaign
promise to relocate a controversial U.S. air base outside of Okinawa.

Kan was elected the 94th prime minister of Japan in parliament on
Friday and formed his cabinet earlier Tuesday. Noda, who served as
deputy finance minister under Hatoyama and was a close ally of Kan’s,
was promoted to head the Ministry of Finance.

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

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