Japan 'understands' China and Korea on yen


Koizumi (l) met with Malaysian premier Mahathir Mohamad on his tour, which bolstered Japan's influence in Asia at a time China's is rising

TOKYO, Japan -- Japan is listening to concern over the yen from China and South Korea, a top official said Wednesday.

"We know they have such concerns, and we understand," Zembei Mizoguchi, head of the Finance Ministry's international bureau, told reporters.

"We are always meeting with our counterparts" in those countries, Mizoguchi said.

But skeptics say Japan is paying lip service on its currency, for diplomatic reasons, and will continue to weaken the yen.

The yen, having lost around 15 percent of its value last year, has weakened dramatically so far in 2002.

Stronger yen hits 131 on Wednesday

But it strengthened on Wednesday morning, trading at 131 to the dollar, before stabilizing around 131.38.

South Korea and China have been the loudest voices calling for Japan to curb its currency's fall.

On Tuesday, China's central bank governor, Dai Xianglong, again called on Japan to monitor its currency carefully.

Failure to do so could lead to a domino effect of Asian currencies devaluing, Dai warned.

The Bank of America feels the words of warning will have little effect.

Japan 'won't do China's bidding'

"While this may cause MOF officials [at Japan's Ministry of Finance] to tone down their rhetoric, we haven't heard anything from them to suggest that they think the fall has gone too far," the bank wrote in a report on Dai's comments.

"This is not an administration that is going to do China's bidding."

The bank noted that Japanese Prime Minister Junichiro Koizumi visited a war shrine amid a public outcry in China and Korea.

It expects Japan to make diplomatic overtures to woo China but to keep pushing the yen rate higher against the dollar.

Korea's central bank governor said he had discussed the yen with Bank of Japan Governor Masaru Hayami when they were both attending a conference earlier this month.

The central Bank of Japan opted to leave monetary policy alone on Wednesday, at a meeting of its policy board.

Korea and China, both key trading partners of Japan, have criticized the yen's recent weakness against the dollar. Beijing has even called the yen's sudden slide "irresponsible," in state media.

Currency traders say Japanese authorities are encouraging a weaker yen by "talking it down" with comments suggesting they won't intervene to prop the yen up.

They are thought to favor a weak currency to boost exports and the profits of Japanese companies that do business overseas.

Koizumi has just completed a five-nation tour of Southeast Asia, in which he sought tighter trade ties and signed a free-trade deal with Singapore.

Japan is keen to maintain its influence in Asia, where China's rising economic power threatens Japan's long-time status as the region's business powerhouse.