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G7 Agrees To Take Coordinated Action on Japanese Yen

18 March 2011 04:38 (UTC +04:00)

Baku-APA. Finance officials from seven of the world’s biggest economies have agreed to take rare coordinated action to weaken the Japanese yen, APA reports quoting voanews.com website.
The yen has surged to record levels following last week’s earthquake and tsunami and the resulting nuclear emergency in Japan. A yen that is too strong could cripple Japanese exports and further worsen the economic impact of the country’s disasters.
Finance leaders from the Group of Seven major industrialized nations made the decision during a phone conference early Friday .
The yen immediately dropped in value early Friday following news of the joint market intervention. Japan’s Nikkei index climbed on the news, rising 2.5 percent and recouping some of the week’s losses.
Also Friday, the Bank of Japan says it will pump an additional $37 billion into Japan’s financial system to stabilize money markets that have been shaken.
The injection of money is the latest in a series of attempts by the Japanese central bank to ensure that financial institutions in disaster-stricken parts the country do not run out of funds.
A strong yen is a big concern for major Japanese exporters like Toyota Motor, the world’s largest automaker. Bloomberg financial news says for each yen the currency appreciates against the dollar, Toyota’s earnings are cut by $372 million.
Analysts said some currency traders perceive the yen as a safe haven investment during Japan’s turmoil. Others say the currency’s value has risen as Japanese companies repatriate their cash to help pay for the reconstruction effort that will be needed in the months ahead.
For much of the week, the Nikkei has fallen. It rallied Wednesday surging 5.7 percent to recover almost a third of the ground lost earlier this week. But Asian stocks resumed their downward track Thursday, with Hong Kong’s Hang Seng market falling more than 1.8 percent and exchanges in other countries also down or flat. However, European stock indexes advanced sharply and U.S. stocks increased as well.