17 Sep 2010

Japan intervenes in currency markets

10:01 am on 17 September 2010

Japan has intervened in the currency markets for the first time in 6.5 years, to weaken the value of the yen against the US dollar.

Leading shares rose as much as 3% afterwards.

The Bank of Japan stepped in to sell yen and buy dollars, after the yen hit a 15-year high against the dollar on Tuesday. The size of the intervention was not revealed.

The BBC reports the dollar was up 3.1% to 85.63 yen, on track for its biggest daily gain in nearly two years. The euro was also up 2.9% at 111.10 yen.

Investors welcomed the intervention, sending the Nikkei up by 2.9% at first. The index eventually closed 2.3% higher at 9,516.56.

Honda's shares closed up 4%, while Sony ended 4.2% higher.

Toyota has estimated that every one-yen rise versus the dollar reduces earnings by about 30bn yen.

Severe situation

Finance Minister Yoshihiko Noda says Japan is closely monitoring currency developments.

"Our country's economy is still in a very severe situation with continued deflation," he said.

The yen's rapid appreciation "harms the stability of the economy and finances. We cannot tolerate it."