TOKYO, Sept 22 - Japan's new finance minister, Sadakazu Tanigaki, stuck to the well-worn official line that volatility in exchange rates is undesirable on Monday, offering few clues on Tokyo's forex policy after the weekend G7 meeting. Hours before the 58-year-old former lawyer was named to the post, the yen jumped to 2-Ѕ year highs against the dollar on speculation Japan was finding it more difficult to continue its yen-selling intervention after a Group of Seven statement at the weekend calling for more flexible exchange rates. So far, Tanigaki is keeping his cards close to his chest, saying only that currency levels should be determined by economic fundamentals and that excessive volatility is undesirable.
"On foreign exchange rates, I do not intend to change our existing policy. Forex levels should reflect fundamentals and should not be volatile," Tanigaki told a five-minute news conference shortly after the announcement of Prime Minister Junichiro Koizumi's new cabinet lineup. "We must be flexible and act when necessary, keeping the big picture in mind," he added. He was due to hold a further full-scale news conference later on Monday. Analysts say Tanigaki's initial terse comments should be taken with a grain of salt, given the Japanese authorities' conspicuous absence from the market over the past few days. They had been intervening heavily this year, spending a record nine trillion yen ($80.58 billion) in just the first seven months of the year.
Their absence of late has emboldened yen bulls and pushed the dollar down to around 111.40 yen , down more than two percent from late Friday levels. "(Outgoing Finance Minister Masajuro) Shiokawa was pro-intervention, but the choice of Tanigaki gives me the feeling that Japan may be near the end of aggressive currency intervention policy, as he seems to be neutral about currency intervention," said Morgan Stanley strategist Toru Umemoto. Tanigaki's predecessor Shiokawa, 81, was not shy about complaining about yen strength, often blaming it on what he called speculative forces. It remains to be seen how the new minister handles questions about the G7 statement.
SEASONED POLITICIAN
Despite his relative youth, Tanigaki is a seasoned politician who experienced foreign exchange market turbulence in his stint as vice finance minister during the 1997/98 Asian Crisis. Born on March 7, 1945, in Kyoto, he became a lawyer after graduating from Tokyo University. He was elected to parliament for the first time in 1983, taking the seat of his father Senichi Tanigaki, a former education minister. Tanigaki has held a series of portfolios including vice minister of posts and telecommunications, vice minister of defence, director-general of the Science and Technology Agency and vice minister of finance. He also headed a government body which later evolved into the current Financial Services Agency (FSA).
"Tanigaki has been the minister in charge of the IRC (state-backed Industrial Revitalisation Corp, which began operating in May) and generally has a reasonably positive reformist image, if anything above that, implied by his past record," said Richard Jerram, chief economist at ING Securities. "Tanigaki's appointment to MOF (the Ministry of Finance) probably does not have implications for foreign exchange intervention policy, again due to the importance of bureaucratic influence at MOF," Jerram added, however.//