/www.bloomberg.com/ By Kanako Chiba
Tokyo, Dec. 6 (Bloomberg) -- Four of Japan's top economic ministers stepped up a verbal assault on the yen that helped push the currency down more than 2 percent against the dollar this week.
Finance Minister Masajuro Shiokawa said there's an ``imbalance'' in world exchange rates. The vice finance minister called the yen's decline this week ``appropriate,'' and the trade minister said ``a weaker yen is preferable to a stronger yen.''
The remarks come amid signs that the world's No. 2 economy may be headed for its fourth recession in a decade. Japan's leading index for October fell to a level that points to an economic contraction in six months as consumer confidence weakened and share prices fell, a government report said today.
``The economic situation is becoming severe, and next fiscal year's outlook is weaker,'' said Heizo Takenaka, Japan's minister for economic and fiscal policy. ``The Japanese currency has been overvalued.''
Japan's economic growth slowed to 0.7 percent in the third quarter from 1 percent in the second. Exports, which grew 5.9 percent in the second quarter -- accounting for half of economic growth -- slowed to a gain of 0.5 percent in the third quarter.
Exporters
A weakening yen helps Japanese exporters by increasing their earnings when converted into local currency and making it easier for them to cut prices overseas without reducing revenue.
``The government must bring the yen down,'' said Satoshi Iue, Chief Executive Officer at Sanyo Electric Co., the world's biggest maker of digital cameras. ``Efforts by Japanese manufacturers like us are made into nothing because of the strong yen.'' The government should weaken the yen to 170 against the dollar, Iue said.
Sanyo Electric turned to a group net loss of 1.13 billion yen ($9 million) in the three months ended Sept. 30 from a 2.42 billion yen profit a year ago.
So far this year, the yen has risen 5.3 percent against the dollar. It weakened to 125.04 to the dollar at 4:33 p.m. in Tokyo from 124.92 yesterday in New York.
``Officials are doing all they can to push the yen down, with the view it would help the economy,'' said Takayuki Nakamura, who helps manage 2.5 trillion yen ($20 billion) at Daiwa SB Investments Ltd. The yen may weaken as low as 130 against the dollar by the end of this year, Nakamura said.
Yuan
Shiokawa said that ``imbalances'' in the world's major currencies may be a topic of discussion at a meeting of the Group of Seven industrialized nations early next year. He singled out the Chinese yuan, which is pegged to the U.S. dollar.
``Surely, the yuan is too weak, when we consider the current strength of the country,'' he said at a news conference.
The assault on the yen started with remarks by Haruhiko Kuroda, vice finance minister of the international affairs bureau, who said the yen's decline this week was ``appropriate.''
``The yen is correcting itself from excessive strength,'' Kuroda, the ministry official in charge of managing the currency, told reporters at the ministry.
His comments were followed by those of Takeo Hiranuma, Japan's minister of economy, trade and industry, at his own twice- weekly press conference.
``A weaker is yen is preferable to a stronger yen for the overall economy, especially during deflationary times,'' Hiranuma said. Consumer prices in Japan haven't risen in four years, eroding corporate profits.
Few Policy Options
Weakening the yen is one of the few policy options left to officials to boost the economy. The Bank of Japan cut interest rates almost to zero in March last year, and the government approved 3 trillion yen in extra spending for this fiscal year ending March 31, adding to Japan's national debt, which at close to 140 percent of gross domestic product is the industrialized world's largest.
``This concerted effort by the officials shows that Japan is running out of the policy options,'' said Koji Fukaya, chief foreign-exchange analyst at the Bank of Tokyo-Mitsubishi Ltd. ``The government cannot increase spending any further, so all what they can do is talk down the yen.''
Even so, Japanese officials apparently aren't prepared to weaken the yen by selling the currency, a strategy that has proved ineffective in the past. The Bank of Japan buys or sells the currency at the behest of the Ministry of Finance.
Japan sold $33 billion of yen between May 22 and June 28 in an attempt to stem the currency's rise, according to Finance Ministry figures. The currency strengthened to 119.47 from 124.18 yen during the period.
``Artificial weakening of the yen would have side effects, so it's best to let the market decide'' foreign-exchange rates, Hiranuma said.