Yen Holds Japan Back

Online, October 6, 2011 (Newswire.com) - Japan said on Friday it will boost its currency intervention fund and keep watching dealers' trading positions in yet another effort to tame the yen in the face of growing evidence that its strength is stalling the economy's post-quake rebound. The Finance Ministry said it could spend another 15tn yen ($196bn; €150bn) to stabilise the currency, which has risen in value as investors look for safety amid economic uncertainty. Meanwhile, data showed factory output rose by 0.8% in August, less than the expected 1.5%. Worries for the health of the world's third largest economy have increased as exporters face a soaring yen that eats into profits and as demand softens both at home and abroad amid fears of a global slowdown. The government will maintain for two more months monitoring of currency traders' daily positions put in place last month to discourage speculative bets on the yen's rise. The yen has held broadly steady against the dollar at around 76-77 yen since Tokyo bought a record 4.5 trillion yen worth of currencies on Aug. 4, but the currency continued to rise against the euro and currencies of its Asian rivals. With the yen still within striking distance of its all-time high of 75.94 against the dollar, Tokyo is clearly alarmed that its exporters are ill equipped to cope with such persistent yen strength.

The Ministry of Economy, Trade and Industry said on Friday the industrial production has now almost completely recovered from the effects of the earthquake and tsunami, the result was below a median forecast for a 1.5% rise in a survey of economists by Dow Jones Newswires and the Nikkei. In July, production rose 0.4% from the previous month. In a sign there may be a bumpy road ahead for production in the coming months, manufacturers polled by the ministry expect their orders to fall 2.5% in September, and climb 3.8% in October. Manufacturers have now largely overcome post-quake production disruptions and the threat of power shortages due to the Fukushima Daiichi nuclear crisis and analysts are now focusing on how Japan will cope with the economic turmoil overseas as well as the yen's appreciation. Japan's unemployment rate fell to 4.3% in August from 4.7% in July, improving for the first time in three months. An official briefing reports on the data noted that the drop in the figure does not necessarily mean an improvement in the labour market. Meanwhile, the nation's core consumer price index rose for the second-straight month in August, partly due to an increase in energy prices. The nation's core CPI rose 0.2% from a year earlier in the month, data from the Ministry of Internal Affairs and Communication showed, higher than the median forecast for a 0.1% gain in a poll of economists surveyed by Dow Jones and the Nikkei. The week's data has led some analysts to question the strength of Japan's post-earthquake recovery. Analysts say the latest data illustrate the fragile state of Japan's economy and will spur opposition to the government's plan to raise taxes to help fund reconstruction from the March 11 disasters.