Tokyo, Jan. 8 (Bloomberg) -- Japanese Finance Minister Masajuro Shiokawa has failed in his efforts to talk down the value of the yen against the dollar. He'll need to sell the currency to meet his goal of boosting the economy, investors and analysts said. He hasn't helped by calling for different targets. He said yesterday that 125 yen per dollar is a ``stable'' rate, 4 percent weaker than the current level of 119.99. On Dec. 20, in a front- page article in the Nihon Keizai newspaper, Shiokawa said the yen should trade at about 150 per dollar. On Dec. 2 he said the yen should plunge to as much as 160 versus the dollar.
The longer Japanese officials delay selling the currency to back their words, the less likely the yen is to fall, investors said. The stronger the yen, the worse it is for companies, as the U.S. accounts for about a quarter of Japanese exports. Canon Inc., the country's largest office-equipment maker, earns 75 percent of its revenue abroad. ``The impact of trying to talk the yen down is getting smaller, as they haven't acted,'' said Takayuki Nakamura, a fund manager at Daiwa SB Investments Ltd., which oversees 2.5 trillion yen ($21 billion) of assets.
Exporters' Profits
Japanese officials are aiming to end a rally that sent the yen up almost 11 percent against the dollar last year, eroding exporters' profits on overseas sales. The government in late December cut its export growth forecast to 2 percent for the year that begins April 1, from a projected 5.4 percent this fiscal year. The yen has rallied about 3.8 percent against the dollar since Shiokawa's early December comments. Japan sold 4 trillion yen ($33 billion) in May and June, according to the Ministry of Finance. Shiokawa and his deputy, Haruhiko Kuroda, may avoid spending more on trying to weaken the currency after sales last year had little effect, investors said. When Japan last sold the yen on June 28, the dollar traded between 118.40 yen and 120.26 yen. It went on to strengthen to 115.54 in July. Exports, which accounted for about half of Japan's second- quarter expansion, have slowed as the yen strengthened. Japanese exports increased 0.6 percent in the third quarter, down from 5.9 percent during the previous three months.
`Less Effective'
Merely talking about a weaker yen ``has become progressively less effective,'' said David Simmonds, senior emerging markets strategist at Royal Bank of Scotland Plc in Singapore. ``In the face of an internationally weak dollar,'' talk alone won't push the yen to 125. The yen still held close to a 3 1/2-month high against the dollar, even as Japanese officials switched tactics to use public comments during the second half of 2002 as the weapon of choice against a stronger yen. Japan's currency was buoyed by expectations a possible U.S. war with Iraq will prompt international investors to keep their money at home. To counter some of the strength, a Ministry of Finance official called news organizations last week to say Japan is able to sell yen even while its financial markets were closed for national holidays. Talk from Japanese officials ``is definitely keeping the market on its toes'' by posing the threat of actual yen selling, said Ken Landon, senior currency strategist at Deutsche Bank AG. Japan's efforts to weaken the yen will push the currency between 122 and 125 per dollar by the end of the quarter, he said.
`Behind the Scenes'
Japan's government also often works ``behind the scenes'' to weaken the yen, such as trying to influence the strategies of the country's largest investors, encouraging them to leave proceeds of any sales of U.S. assets in dollars, he said. Some traders expect Japan to sell its currency should it strengthen too much. ``There are still fears of action if the dollar falls to 118 or below,'' said Kazuhiro Takeuchi, senior manager of the trading group at Mizuho Corporate Bank Ltd. in Hong Kong. While traders acknowledge the possibility of yen sales, they say Japanese officials have little chance of getting the currency to the 150 yen per dollar level Shiokawa aimed for last month. Yen sales close to current levels would only weaken it to about 122 against the dollar, Takeuchi said. Shiokawa's comments yesterday may signal Japan is waiting for a rapid change in the yen rate to sell, some investors said. ``The government will take responsibility for and appropriate action on extreme movements in the yen,'' Shiokawa said at a twice- weekly press conference. He said a fluctuation of about 7 yen qualified as ``extremely volatile.''
A change of 3 yen to 4 yen against the dollar in a day may prompt Japan into action, Daiwa SB's Nakamura said. The Finance Ministry ``is concerned with rapid appreciation in the yen, and is more likely'' to sell on quick price swings, said Kazuyuki Harada who helps invest 12.5 trillion yen at Sumitomo Mitsui Asset Management Co., Japan's largest fund manager. //www.fxeuroclub.ru/