By Mari Murayama and Kanako Chiba
Tokyo, Nov. 13 (Bloomberg) -- The yen fell after Zembei Mizoguchi, director-general of the Ministry of Finance's international bureau, signaled Japan may sell its currency to stop a 1.8 percent gain made over the past 2 1/2 weeks.
Mizoguchi told reporters ``too much appreciation'' of the yen is not favorable and Japan will take action when necessary. Finance Minister Masajuro Shiokawa on Saturday suggested the government may sell its currency to thwart gains that erode profits companies earn on overseas sales.
The yen weakened to 120.83 per dollar from 120.53 late New York trading. Japan's currency strengthened to as much as 119.75 yesterday after a plane crash in New York raised concern of further terrorist strikes. Japan may now act to keep the yen weaker than 120 because some companies forecast overseas earnings using that rate, traders said.
``Mizoguchi's remarks, which came after the yen rose beyond 120 per dollar, put market participants on alert,'' said Shogo Nagaya, foreign exchange manager at Nomura Trust and Banking Co. ``A series of warnings from officials show they are concerned a stronger yen would harm the economy.''
The Ministry of Finance in September instructed the Bank of Japan to sell 3.2 trillion yen ($26.5 billion) to keep the currency from rising.
For the year that will end March 31, Toyota Motor Corp., Japan's biggest automaker, and Mazda Motors Corp., fifth-biggest, forecast their earnings using a rate of 121 yen per dollar, and won't get help from the currency unless the yen is weaker than that level on average.
Bank Stocks Slide
The yen also fell as Japan's Nikkei 225 stock average briefly dropped below 10,000 for the first time in a month. Bank stocks fell for an eighth day in the past nine.
``The trend is for a weaker yen as banks' decline could fan concern the nation's banking system is facing difficulties,'' said Nomura Trust's Nagaya.
Japan's banking index has lost a quarter of its value in the past six months as the industry struggles to deal with 150 trillion yen of bad loans and trillions more yen of losses on shareholdings with the Nikkei at an 18-year low.
Further gains in the dollar may be limited on concern a plane crash in New York will curtail consumer confidence and spending, delaying an economic recovery.
The U.S. currency tumbled yesterday after an American Airlines plane crashed near John F. Kennedy International Airport, sparking speculation terrorists were behind the incident. It later reversed losses as government officials said there is no evidence yet terrorists were responsible, though analysts say the U.S. currency may still drop should consumers reduce their traveling.
Cockpit Recorder
The cockpit voice recorder recovered from the plane suggests an accident caused the crash, said Marion Blakey, chairwoman of the U.S. National Transportation Safety Board.
``Until there's a conclusion this is an accident, possibilities for additional terrorist attacks can harm the dollar,'' said Yasuharu Tsuru, a foreign exchange manager at Mitsubishi Trust & Banking Corp.
The crash comes two months after terrorists hijacked four airplanes and flew them into the World Trade Center towers in New York, the Pentagon and a Pennsylvania field.
The Sept. 11 attacks hampered the airline industry, leading to job cuts. AMR Corp., the largest airline company and American Airlines' parent, said it would eliminate about 20,000 jobs.
The U.S. unemployment rate rose in October to 5.4 percent, the highest level since December 1996. A report Thursday is likely to show the number of workers filing new claims for state unemployment benefits rose in the week that ended Saturday, analysts said. More unemployment may lead to less consumer spending, which accounts for two-thirds of gross domestic product.
In other trading, the dollar rose to 1.6446 Swiss francs from 1.6385 in New York. The British pound was quoted at $1.4538, down from $1.4542 yesterday.