Tokyo, Nov. 12 (Bloomberg) -- Japan may act to stem the yen's rise, Finance Minister Masajuro Shiokawa said, and is checking the budget to see if extra spending is needed to bolster the economy. ``If the yen rises further, then we have to say it's an unnatural move, failing to reflect the fundamentals of the economy,'' Shiokawa said at a press conference following a Cabinet meeting. ``We will consider steps if we think the currency shows unnatural moves.''
The yen traded at 119.74 yen to the dollar at 12:08 p.m. in Tokyo, compared with 119.54 yen late Monday in New York. It rose to a two-month high of 119.11 yesterday. The yen has risen against its U.S. counterpart almost every day since Oct. 22. Shiokawa later said in parliament that the yen ``is a bit too strong now'' and Japan will ``take appropriate action'' if the currency's rise accelerates further. The yen's 9.9 percent rise this year has hurt Japanese exports, threatening to cut short a recovery from the third recession in a decade. Exports, which accounted for half of Japan's 0.6 percent second quarter growth, fell for a fourth month in September.
A slowing economy is denting tax revenue, which is falling short of projections. That, together with efforts to speed the disposal of some 52.4 trillion yen ($438 billion) of bad loans at banks, may force the government to compile an extra budget for the fiscal year ending March 31, Shiokawa said.
Bond Sales
Shiokawa today said he hasn't decided whether to compile an extra budget, saying he first wants to check how much money is left unused in the regular budget. An extra budget would require more bond sales, forcing Prime Minister Junichiro Koizumi to break his pledge to cap sales at an annual 30 trillion yen. ``We will decide whether we must sell more bonds after checking the total amount of budget spending,'' Shiokawa said. Japanese government 10-year bonds fell 0.046 to 101.257 as of 11:22 a.m. in Tokyo. The yield rose 0.5 basis point to 0.96 percent. A basis point is a hundredth of a percentage point.
Japan will release revised figures for this fiscal year's tax revenue late this month. The government may need to sell more bonds if revenue drops sharply below forecasts, Vice Finance Minister Toshiro Muto said yesterday. This fiscal year's revenue shortfall may be larger than last year's 1.7 trillion yen, Muto said yesterday. The government last December forecast 46.82 trillion yen in tax revenue for the current fiscal year, 7.7 percent less than a year before.
`Bold' Steps
Koizumi yesterday told reporters that he would take a ``drastic and flexible stance'' in providing an extra budget if needed. Chief Cabinet Secretary Yasuo Fukuda echoed that language today, promising ``bold and flexible measures.'' ``It is important that the government carry out fully various measures to counter deflation,'' Fukuda said. ``We also need to consider ways to strengthen the safety net'' to buffer the effects of a drive to dispose of banks' bad loans, which is expected to drive more companies into bankruptcy. Japan's economy probably grew 0.5 percent in the third quarter from the second, according to a Bloomberg News survey of economists, slowing from 0.6 percent growth in the period ending June 30. The third-quarter report on gross domestic product will be released tomorrow.//www.quote.bloomberg.com