By James Amott
London, Nov. 12 (Bloomberg) -- The yen, which has risen 1.8 percent against the dollar in the past two weeks, fell against the U.S. currency and the euro after Finance Minister Masajuro Shiokawa signaled Japan may sell yen to boost exporters' earnings.
Shiokawa said in a Nihon Keizai newspaper report Saturday that he had ordered the Ministry of Finance to consider selling the Japanese currency. Japan wants to weaken the yen to boost the country's contracting economy by increasing companies' overseas earnings and encouraging exporters. Japan's government said Friday the economy will shrink 0.9 percent this fiscal year.
``They have enough economic problems without adding a strong yen,'' said Francesca Fornasari, a currency strategist at Lehman Brothers Holdings Inc. ``They're still out there'' prepared to sell the currency, she said. She expects the currency to end the year at 120 per dollar.
The yen weakened to 120.64 per dollar, from 120.19 late Friday. It was at 107.79 per euro, from 107.42. The yen is up 3.4 percent against the dollar in the second half. New York markets are closed for a holiday.
Other senior officials have said in recent days Japan is prepared to act to weaken its currency. Haruhiko Kuroda, vice finance minister of international affairs, said Friday the yen ``doesn't reflect fundamentals'' and that policy makers were watching the currency, according to Dow Jones Newswires.
`Alarm Bells'
The MOF in September instructed the Bank of Japan to sell 3.2 trillion yen ($26.5 billion) over seven days. That series of interventions helped weaken the yen from a seven-month high of 115.83 per dollar in the middle of September to as low as 123.35 in late October.
``Japan intervened in September just after Shiokawa's warnings,'' said Hiroshi Sakuma, a foreign-exchange manager at Barclays Bank Plc. ``Now that he is sounding alarm bells again, we can't buy yen when it's stronger than 120 per dollar.'' Bank of Japan policy makers will meet Thursday and Friday.
The yen's decline against the dollar helped Mazda Motors Corp. return to profit in the first half of the fiscal year. For the year to March, Japan's fifth-biggest automaker forecast its earnings using a rate of 121 yen per dollar, and won't get help from the currency unless the yen is weaker than that on average.
With interest rates at a record low and the government constrained from spending by a debt load equal to a third more than the nation's annual economic output, policy makers have few options except a weaker yen to pull the economy out of an 11-year slump, analysts said. The government's growth prediction estimated the second-biggest economy will have its biggest drop in more than two decades.