Whereas the Japanese currency reached Friday its more high level in 13 years vis-a-vis the dollar, as well as historic summits vis-a-vis the euro, the Ministers for Finance and banking central of G7 worried in a rare joint news release about this “excessive volatility”. ( Finance Information City )
“We will continue to supervise the markets attentively and to cooperate in an adapted way”, added the Ministers of Finance of G7 (Germany, Canada, the United States, France, Italy, Japan, the United Kingdom).
But, apart from a bending of the yen as short as light, the foreign exchange market royally was unaware of this warning. Idem for Tokyo Stock Exchange, which underwent a new rout in spite of the measurements announced by the Taro Aso Prime Minister to try to calm it. Leaded by the banking values, the Nikkei index fell from 6,36% to 7.162,90 points, its low level since October 1982, that is to say well before the stock exchange and real speculative bubble of the end of the year 1980.
The three plus large banks of the country, Mitsubishi UFJ, Mizuho and Sumitomo Mitsui, saw their actions wildly sold off because of an article of the Nikkei daily newspaper lending the intention to them to increase their capital to raise their ratio of profitability, which melted because of the financial crisis. After the fence, Mitsubishi UFJ, whose title tumbled down of 14,64%, confirmed that it was going to emit up to 990 billion yens (8 billion euros) of new actions. The other banks contradicted.
This new eclipsed the advertisement by Mr. Aso of a raising of the ceiling for the injections of public capital in the large banks where necessary, and of restrictions for the short sales, a marked practice to accelerate the fall of the Stock Exchange.
The actions of the large Japanese exporters, like Toyota, Sony or Panasonic, were also abused by the investors who fear the effects of a yen extremely prolonged on the benefit of these companies. On this subject, the official statement of G7, considered to be surface, hardly reassured.
“If it were about a joint news release to the clean direction of the term, the other countries would be already making comments to support it. It will be difficult to bring back drastiquement the yen to the bottom, except taking radical measures like an intervention”, commented on Kenichi Yumoto, a person in charge of the department of the exchanges at the General society in Tokyo.
This official statement is “too surface to involve a reaction”, it added, by suspecting Japan, which chairs G7 this year, of having torn off the bad one thanks to its partners this declaration of pure form. According to certain speakers, this official statement has even shower the hopes of the market, making conceal morning rumours according to which the Japanese government was going unilaterally to intervene to make bend the yen.
The Japanese government had habit, in the past, to massively sell yens on the foreign exchange market as soon as the Japanese currency flew away a little too much with its taste, the “tolerance level” being generally estimated with the neighbourhoods of 100 yens for a dollar.
No intervention however took place since March 2004. And in spite of a dollar which evolved/moved Monday in the neighbourhoods of 93 yens, the majority of the analysts judge an intervention to weaken the improbable yen because of squeakings of teeth which it would cause in the United States and in Europe. “However, we think that there exists a risk so that the ministry intervenes unilaterally if the dollar continues to move back vis-a-vis the yen, between 80 and 90 yens”, the analysts of Barclays Capital informed.
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