Yen tumbles to 7-year low

THE JAPANESE government yesterday moved to talk up the yen after it hit a seven-year low against the dollar.

The yen tumbled to 137 to the dollar after it was reported that Robert Rubin, the US Treasury Secretary, was willing to see the currency continue falling in order to stimulate the Japanese economy.

On Monday, a US magazine reported that Mr Rubin was willing to see the yen slide to 140 or even 150 per dollar if that was what it took to stop a collapse of Japan's economy.

Currency markets took Mr Rubin's remarks as a hint the US Treasury was willing to sacrifice US competitiveness to get Japan's economy back on its feet. As European markets closed, the yen stood at 137.05 to the dollar.

However, in the Japanese parliament, Ryutaro Hashimoto, the Prime Minister, hinted the yen was now too weak. "It is not a figure that makes me happy," he said. "Everybody has lost too much confidence in the Japanese economy. They have become too sensitive to market fluctuations."

As markets in Europe and the Far East dragged the yen lower, Japan's ministry of finance said it would take "decisive action" to shore up the currency.

Koji Tanami, Vice Finance Minister, said there was international support for attempts to stop the yen falling too far. "At the last Group of Seven meeting in London the United States said it shares Japan's concern over excessive yen weakness," he said.

Mr Tanami added: "Japan will continue to cooperate with other nations and take decisive action against excessive weakness in the yen." However, he declined to say whether the yen was now excessively weak.

Mr Rubin passed up an opportunity to deny the report of he alleged remarks. Asked if it was untrue, he stuck to the oft-repeated formula that a strong dollar was in US interests.

Analysts said the Bank of Japan may be ready to intervene. There was a risk that the yen's slide would trigger a fresh round of devaluations of south-east Asian currencies.

Herve Goulletquer, chief economist at Credit Lyonnais, said: "A weaker yen will not be good for Asian countries."