Japan set to pave way for G7 intervention over yen

THE STRONG yen will be at the top of the agenda for finance ministers and central bankers from the Group of Seven industrial nations when they meet at the weekend.

Currency analysts firmly expect the Bank of Japan to decide on a significant easing in monetary policy at its council meeting today. It has come under severe pressure from Japanese politicians because such a move is seen as a pre-condition for other G7 countries to intervene in the markets to hold down the yen.

Japan has sold about $35bn-worth of yen on nine occasions since 10 June, but the Bank of Japan has so far "sterilised" these sales, offsetting them in the domestic money markets. A decision to halt this sterilisation could herald a G7 deal at the meeting in Washington on Saturday.

The dramatic climb in the Japanese currency, especially against the dollar, has raised fears that its strength could derail the economic recovery. The dollar fell to a near four-year low of 103.20 earlier this month, although it has regained some ground in recent days as speculation about a shift in policy has mounted.

The strong yen problem has been given greater urgency by the approach of 30 September, the end of the half year for many Japanese investment institutions.

The 16 per cent rise in the yen will have caused them paper losses of about $360bn - 7 per cent of Japanese gross domestic product (GDP) - by the time they square their books, according to Carl Weinberg, chief economist at High Frequency Economics. He predicted the prospect of such huge losses would tip the debate within the Bank of Japan.

"Currency market intervention is futile unless other changes are implemented at the same time to support the move," he said.

US and Japanese officials have held several meetings in the run-up to next weekend's G7 session.

The last time the G7 tried - and succeeded - to turn around the currency markets was April 1995. After that episode of intervention the dollar climbed from a postwar low of 82.66, peaking at 146.31 in August 1998. The dollar remained steady at just above 106 yesterday.

The G7 is also due to consider the economic situation in two hotspots, Russia and Indonesia, at Saturday's meeting.

Both countries have borrowed extensively from the IMF and, in both cases, there are grave concerns about possible fraud.

A report issued yesterday by the UN Conference on Trade and Development warned that the economic crisis in Asia was not over. The gloomy warning came on the eve of publication by the IMF of considerably more upbeat forecasts for the world economy.

The violence in East Timor and the potential need for aid for peacekeeping and reconstruction will also be discussed.

The latest humanitarian emergency follows in the wake of a string of disasters, human and natural, including Hurricane Mitch and Kosovo.

Start your day with The Independent, sign up for daily news emails
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
footballShirt then goes on sale on Gumtree
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvName confirmed for third series
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine