By Stephen Cannon
Tokyo, March 7 (BridgeNews) - Finance Minister Kiichi Miyazawa said Wednesday he had no objections to the yen weakening on its own, but his government was not considering a policy of weakening the Japanese currency to boost the country's flagging economy.
Miyazawa's comments indicated he was not concerned about the yen's current weakening trend against the U.S. dollar as the Japanese currency sank to a 20-month low against the greenback.
As of 1100 GMT one dollar was fetching 120.06 yen in international trade.
The Japanese currency had earlier began its slide after Bank of Japan Governor Masaru Hayami was reported making comments interpreted to mean that Japan could guide the yen lower by selling the currency.
The dollar jumped to a six-week high of 119.83 yen immediately after Miyazawa's reaction to Hayami's comments.
Hayami's reported comments earlier Wednesday were interpreted by some market players to mean that guiding the yen down to combat economic weakness could be an effective government policy.
"It is true that as an academic theory, that foreign exchange interventions can solve deflation problems," said Miyazawa. "Since it's his specialty, Hayami might have made some kind of comment as if it were Bank of Japan policy. That's how I size it up, but in reality we aren't thinking of adopting such a policy."
In recent times utterances of the central bank chief and members of Japan's ruling coalition government of Prime Minister Yoshiro Mori appear to have been out of sync.
"Hayami was probably just in a way presenting arguments to himself," said Miyazawa. "I don't have such a feeling, but if the yen weakens on its own I don't think it's bad."
The Japanese finance minister added, "However, I don't see a reason for using (foreign exchange policy) as such a tool."
On the day of drama for the Japanese currency Hiroshi Okuda, the chairman of Toyota Motor Corp. and the head of Japan's leading business lobby noted that downside risks in the Japanese economy were becoming a reality.
Although Okuda beli eved the government should hold off on economic measures for the time being, he said he thought decisive steps would be needed if the benchmark Nikkei 225 Stock Average dropped below 11,000. The Nikkei fell to a 16-year low of 12,133.90 Monday.
Japanese shares ended higher on Wednesday, however, following the overnight rise of U.S. heavy-tech laden Nasdaq index. The Nikkei 225 gained 36.15 points, or 0.3% to 12,723.89.
"In December I said that the economy is gradually recovering and in my last press conference I said that Japan's economy is on a plateau and there are extremely large downside risks," Okuda said.
The chairman of the Japan Federation of Employers' Association (Nikkeiren) Okuda added, "Now, looking at the current situation--housing starts, industrial production and price levels--all the numbers are bad. Downside risks are starting to become reality."
However, Okuda said the government shouldn't hastily put in place more economic measures at this time, but instead try to quickly pass the budget for fiscal 2001, starting April 1, through parliament.