Koizumi sees signs of comback in yen's run


Koizumi says too-rapid currency movements are "not favorable"

By Alex Frew McMillan
CNN Hong Kong

TOKYO, Japan (CNN) -- Prime Minister Junichiro Koizumi chimed in on the yen's strong run against the dollar on Tuesday, seeing it as a sign of economic comeback even as he warned against too-rapid currency changes.

"Rapid movements in the foreign-exchange market are not favorable," Koizumi told reporters at his official residence.

That's a sentiment often expressed by Japanese ministers when the yen moves quickly. The prime minister did say that he believes the yen's run shows Japan's recession-mired economy is on the way back.

"I think it's a reflection that Japan's economy is better than expected," he said.

The Japanese currency has been on a tear in recent weeks. It now stands at 125.86 as of early afternoon trade in Asia.

It has appreciated 5.65 percent just since the start of April. On April 1, it stood at 133.40, similar to the level that it started the year.

Yen appreciation 'unnatural'


Then yen has traded in the 125 range Monday and Tuesday

Finance Minister Masajuro Shiokawa suggested on Tuesday that the current moves are not natural.

"The recent volatility makes me sense something other than market principles at work," he said. "It's a bit unnatural."

The yen burst from 127 over the weekend to 125 on Monday, and looked set to break that. But Shiokawa's comments caused yen buyers to pause in their tracks, albeit perhaps temporarily.

Asian currencies are stronger across the board against the U.S. dollar, and currency experts believe the recent movements have more to do with the dollar than Asia.

Before Tuesday, "the usual verbal intervention was powerless" to stop the dollar plunging against the yen, Bank of America wrote in a report.

But there is no doubt that Japan is warning it could step in, with officials such as Zembei Mizoguchi citing "excessive" movements that are "not appropriate." He is head of the finance ministry's international bureau.

"These are all code words that spell intervention," Bank of America wrote. Japan has never bought dollars when the yen is trading at 122.28 or above. But times could have changed.

Export projections at risk


A stronger yen could start to threaten Japan's export projections

The last tankan business-confidence report forecast the yen would average 124.34 in the first half of 2002. If the yen continues to strengthen, export projections could be in danger.

But Japanese officials have also been touting an economic recovery in Japan, a point reinforced by Koizumi. That implies a stronger yen, as confidence in the country returns.

So officials are unlikely to want to undermine the idea that a recovery is taking place by deliberately selling off the currency.

Many observers said last year that Japan was manipulating the yen's rapid weakening, to produce an export-driven recovery for its manufacturers.

Japanese officials controlled the yen with verbal advice. Japan was not above intervening in the market, critics -- including from those companies competing with Japanese producers -- said.

Economics Minister Heizo Takenaka said on Tuesday that the yen's sudden appreciation could put the Japanese economic recovery at risk.

The central Bank of Japan ended its two-day meeting by leaving its lax monetary policy unchanged.