The Bank of Japan's move, yet to be officially confirmed, indicates that the Japanese government is determined to play a role in stopping the Asian currency slide which has taken a heavy toll elsewhere in the region and could have accelerated if it was felt that Japan would allow the yen to decline in value to make local goods more competitive.
Support for the yen may prove to be more effective than the massive income tax cuts announced on Tuesday. These have been judged an inadequate response to the gravity of Japan's economic problems.
This disappointment was reflected in the Japanese stock market yesterday, with the blue chip Nikkei-225 index dropping by more than 2 per cent. Market sentiment was also depressed by news of the fourth largest post- war bankruptcy taking down the foodstuff trader Toshuku with debts totalling an astonishing $4bn.
The company blamed the bursting of the "bubble" economy for its woes. Toshuku is the ninth listed company to go under this year.
Meanwhile the long-running scandal of leading stockbrokers' involvement with racketeers came to a head yesterday with news that Daiwa Securities and Nikko Securities, two of Japan's biggest stockbrokers, were to be severely punished for paying off racketeers who had threatened to disrupt shareholder meetings if they were not paid off.
The Ministry of Finance ordered Daiwa to cease its own account business in stock, futures and options trading for four months, while Nikko received a three-month ban.
Elsewhere calm descended on emerging-market currencies across the globe on Thursday, as South Korea went to the polls.
But worries over the financial stability of South-east Asian currencies moved to Indonesia after Fitch IBCA, the international rating agency, said its credit ratings might be cut to below investment grade because of political uncertainty. IBCA also downgraded the individual ratings of 10 Thai banks.
The continuing Asian turmoil is expected to have led the International Monetary Fund to cut its forecasts for world growth next year.
Meanwhile, it has speeded up its procedures for lending money to countries suffering "exceptional" difficulties.
Only two months after it published its latest forecasts for the world economy, the IMF has said it will update its predictions. The fund has made it clear that the document, to be released on Sunday afternoon, will trim its growth forecast.
In October, the fund's economists put world growth in 1998 at 4.3 per cent, a fraction higher than this year's likely figure. It foresaw a slowdown in the US, UK and Japan, but its prediction of 2.6 per cent Japanese GDP growth now looks very optimistic. So does its 7.4 per cent figure for likely Asian growth.Reuse content