Tokyo acts to tame the yen

Japan has sold ¥1-trillion and loosened its monetary reins, joining Switzerland in efforts to tame currencies buoyed by safe-haven demand by investors fretting about the deteriorating health of the global economy.

The sale pushed the yen to a three-week low of ¥80.20 to the dollar from about ¥77.10, a bigger depreciation than caused by the interventions of September and March.

Tokyo's action followed days of official warnings that the yen had risen to a level that threatened to derail Japan's recovery from the destruction of the March 11 earthquake, tsunami and nuclear crisis.

Finance Minister Yoshihiko Noda said Japan consulted its international partners but intervened on its own to stem what it considered speculative and disorderly currency moves.

Hours later, the Bank of Japan joined the fray, increasing the availability of funds for buying financial assets to ¥15-trillion from ¥10-trillion.

Analysts doubted though that even a combination of yen selling and monetary easing could stem a global shift from the dollar and other riskier assets if Tokyo were to continue acting on its own.

Takashi Kamiya, chief economist at T&D Asset Management, said: "The yen's advance reflects the difficult economic and fiscal situation of both the US and the eurozone.

"So, even if Japan intervenes in the market, it won't be able to combat the yen's rise in the long run on its own."

Finance Minister Noda said: "These currency moves are certain to have a negative effect on the economy and financial markets."

Central bank governor Masaaki Shirakawa said: "We took enough steps after carefully examining economic and price developments, as well as the risks to the outlook. [But] we central bankers tend to say: 'Never say never'."