Japan steps up warning on markets, BOJ gloomy

[Joanne98]

TOKYO, Jan 23 (Reuters) - Japan stepped up its warning against financial market volatility but stopped short of saying Tokyo would intervene in currency markets, as persistent yen gains add to woes for the nation's export-reliant economy.

In a sign of deepening problems, the Bank of Japan said on Friday financial conditions have become tighter even with its key policy rate near zero, suggesting that low rates alone may not be enough to pull Japan out of recession.

Finance Minister Shoichi Nakagawa said he was on high alert against currency moves, as the yen hovered near its 13 ½ year high of 87.10 to the dollar <JPY=> hit earlier this week.

"We are watching financial markets very carefully and with a high sense of alert, and if necessary we must take prompt action in a broad sense," Nakagawa told a news conference.

While Japanese authorities have fired off similar volleys about recent yen rises, many market players expect them to stick to verbal warnings instead of intervening directly in the currency market to halt yen gains, at least for now.

"If the dollar drops below 85 yen, or the currency market shows sharp movement, caution about Japanese intervention will increase," said Kazuyuki Kato, treasury department manager at Mizuho Trust & Banking.

"But it is unlikely that Japan will intervene at the current market levels." The yen stood around 88.50 to the dollar on Friday. Continued...

http://uk.reuters.com/article/marketsNewsUS/idUKT122720090123

[Joanne98]

1. Japanese exports hammered by strong yen and cash-strapped westerners

Japanese exports plunged by a record 35% in December, and economists warned today that there could be worse to come for the world's second-largest economy.

The collapse in demand for exports reflects the deepening downturn in the global economy and was underlined today as consumer electronics giant Sony shocked analysts with a warning of far bigger losses than anticipated this year.

Sony is now predicting operating losses of ¥260bn (£2.08bn) by the end of March - the first time it has fallen into the red for 14 years. This time last year Sony was celebrating an apparent return to financial health with profits of ¥475.3bn.

The weak performance suffered by Sony is being replicated throughout the Japanese export sector as consumer interest cools in the US and Europe, prices fall and the yen continues to gain on major currencies.

December's record fall in exports surpasses the 26.7% drop seen last November.

While weaker exports to developed markets were expected, car and electronics makers will be stunned to see that sales in China and other emerging markets also fell dramatically last month.

Exports to the US fell by a record 36.9% - the 16th year-on-year decline in a row - while those to Europe plunged by 41.8%. Exports to the rest of Asia dropped by 36.4%, with those to China falling by 35.5%.

http://www.guardian.co.uk/business/2009/jan/22/japanese-exporters-yen

[Joanne98]

2. Elaine Supkis on the ZIRP today!

She says the reason the Yen is rising is because China has been buying Yen for years and holding it to protect itself from the ZIRP. According to her Japan can't manipulate it's currency lower anymore. stay tuned..

http://emsnews2.wordpress.com/2009/01/23/yen-stronger-us-demands-stronger-yuan/

[Art_from_Ark]

3. Japan could always manipulate its currency

by printing more and flooding the market with it.

At any rate, when life gives you lemons, try to make some lemonade. With a high yen and low commodity prices, Japan can stock up on all sorts of cheap commodities right now.