Finance Minister Kiichi Miyazawa on Thursday, March 22m, denied that Japan had a secret deal with the United States to prop up the Japanese economy by tolerating a weaker yen. "It is impossible for Japan and the US to control the dollar-yen rate," Miyazawa told reporters, following summit talks in Washington between Prime Minister Yoshiro Mori and US President George W. Bush.
"I didn't tell Mori that the dollar-yen issue should be taken up at the Japan-US summit meeting," the finance minister said. "I know that Japan-US summit meetings have never discussed the forex issue because both sides know it is impossible to guide the yen down artificially," Miyazawa said. "Without any policy weapons at present it is no use to discuss the forex matter," he said.
"At the Japan-US summit meeting, Prime Minister Mori made clear that Japan has set out on fiscal reconstruction." In Monday's summit, Mori pledged to revitalize the Japanese economy by tackling the massive corporate debt and banking bad loans left by the "bubble economy" collapse of the early 1990s.
But financial affairs state minister Hakuo Yanagisawa, who is in charge of cleaning up the financial-sector mess, later rejected reports that Mori had promised to resolve Japan's bad-loan problem within six months.
Market speculation of a secret deal on the yen grew after the Bank of Japan, led by governor Masaru Hayami, on Monday dramatically staged an effective return to zero interest rates. “With the Hayami-Miyazawa-Yanagisawa troika coordinating strong policy statements last week, and following an alleged deal between the US and Japan regarding the yen, the markets are abuzz with speculation that strong medicine for the banks must be forthcoming," said ING Barings financial analyst James Fiorillo.
However, at the summit Bush stressed that Japan should not export its way back to economic health through a weak yen. He said deep, structural reforms were needed instead.
The yen was trading at a 22-month low against the dollar in Tokyo Thursday of 123.66-69. A weak yen would benefit Japanese exporters by making their goods cheaper overseas. On the flip side, a stronger dollar would hurt US exporters. —(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)