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To: MythMan who wrote (48601)	6/22/1999 9:39:00 AM
From: Cynic 2005	Read Replies (1) \| Respond to of 86076

June 22, 1999 -------------------------------------------------------------------------------- Bank of Japan Intervenes Again, Sending Dollar Rising Against Yen By JATHON SAPSFORD Staff Reporter of THE WALL STREET JOURNAL TOKYO -- The Bank of Japan caught financial markets by surprise early Monday with an unusually large $5 billion currency-market intervention that drove the dollar up two yen to levels far higher than the markets had anticipated. The intervention was the latest in several moves over the past two weeks to prop up the dollar and keep the yen in check. Trading opened Monday to news that the dollar-yen exchange rate was just below 120 yen per dollar, a level Japanese business executives have said is appropriate. But the central bank pushed the rate far beyond that level, repeatedly offering to buy dollars and thus increase the supply of yen. At one point in Tokyo, the dollar was trading as high as 122.52 yen. In New York late Monday, it strengthened to 122.49 yen from 120.45 yen Friday. The dollar stood at 121.95 yen near midday Tuesday in Tokyo. Traders had expected Japan to ease up after intervening in Europe late last week, and Monday's move thus left many scratching their heads. "It is very surprising. It is hard to understand why they are intervening so aggressively," said Toshiyuki Suzuki, the chief economist for Sanwa Bank Ltd. in Tokyo, a major competitor in the foreign-exchange market. A Bank of Japan spokesman reiterated the bank's no-comment policy on intervention. But officials at the Ministry of Finance, on whose behalf the central bank intervenes, were quick to support the move with a message they have repeated often over the past weeks: Japan's nascent economic recovery won't be undermined by the currency-market speculators. "We don't want a premature strengthening of the yen," said Eisuke Sakakibara, Japan's influential vice finance minister for international affairs. Effect of Economic Rebound Japan, through intervention, is fighting an inevitable side-effect of a reviving economy. Indicators out of Tokyo in recent weeks have suggested a recovery, with annualized growth in the first quarter reaching 7.9% and the benchmark Nikkei 225 stock average up 14% since January. A stronger economy suggests higher Japanese interest rates, higher-yielding securities and more demand for the currency needed to buy them: yen. Traders had anticipated this by bidding up the yen in early June. For most of the year, the dollar had bought roughly 120 yen on foreign-exchange markets, but in early June the dollar's purchasing power slipped to 118 yen on news Japan's economy might be turning the corner. But by one private estimate, Japan has spent more than $20 billion in June to keep the yen in check. That is because a strong yen, while signaling hopes of recovery, does little to help it, and in fact hinders faster growth in many ways. It makes exports more expensive abroad, and erodes the value of overseas dollar earnings when they are brought back home and exchanged into yen. A stronger Japanese currency also erodes the value of the huge portfolios of overseas assets held by Japan's financial institutions, already weakened by a significant bad-loan problem. Japanese institutions, for example, have been big buyers of securities issued in euros, and some see that as the crucial reason the European Central Bank intervened on Japan's behalf late last week to prop up the value of the euro against the yen, the first such intervention since the euro was launched in January. The Bank of Japan also has supported the dollar on four different trading days over the past two weeks. Comfortable Levels Traders were surprised by Monday's intervention because the dollar, at 120 yen, already was trading at levels with which Japanese businesses are comfortable. Takashi Imai, for example, the chairman of the Japan Federation of Economic Organizations, the country's most influential business lobby, had said only last week that the level before Monday's intervention was fine for business. "I would prefer the dollar to move around 120" yen to the dollar, he said, though a dollar at 125 yen "isn't necessarily bad." But as the yen continues to weaken, some warn it poses risks equally as worrisome as a strong yen. Each time the yen falls in value, U.S. trade groups and their allies in Congress tend to complain about the trade advantage a weak yen gives to Japanese exporters to the U.S. On Monday, the Finance Ministry released data showing that while Japan's overall trade surplus fell in May, its surplus with the U.S. rose 14% over the year-earlier period. The fear is that Japan's surplus with the U.S. will rise with a weaker Japanese currency. "Too much depreciation in the yen will trigger a reaction from the U.S. business world," said Mr. Suzuki at Sanwa Bank. "That is why Japanese corporations aren't too happy to see the yen fall too much, even if it helps their business in the short term." --James Simms of Dow Jones Newswires contributed to this article interactive.wsj.com