Asia Times: Yen rises as G-7 seen pressing Japan to boost economy



	April 28, 1999	atimes.com

Japan Economy

Yen rises as G-7 seen pressing Japan to boost economy
Bloomberg News

London - The dollar fell against the yen for a third day Monday amid speculation Group of Seven officials meeting in Washington later in the day will pressure Japan to step up efforts to jolt its economy from an eight-year slump.

Signs that Japan is acting on that and may announce another plan to stimulate growth could drive international investors to Japanese assets and the yen to buy them.

''Japan may be willing to offer up something to stimulate the economy,'' said Steve Barrow, a currency strategist at Bear Stearns International. ''That might just help the yen."

The dollar fell to 119.04 yen, down from 119.45 in late London trading Friday. The euro was little changed at $1.0617 from $1.0614. The single currency is down more than 9 percent this year, dragged down by the combination of sluggish growth in Europe and concern about the war in Kosovo.

''The relative growth story between the U.S. and Europe is what's driven the euro to this level,'' said Francis Breedon, currency economist at Lehman Brothers International. ''Kosovo is causing the day-to-day fluctuations."

The U.S. economy probably grew 3.4 percent in the first quarter, according to a survey of economists compiled by Bloomberg News. That report will be released this coming Friday. Japan's economy, meanwhile, shrank an annual 3.2 percent in the fourth quarter. And Germany cut its economic growth forecast for this year to 1.5 percent from 2.0 percent.

The dollar pared some losses after Koji Tanami, vice minister of finance, said the U.S. isn't asking Japan to ''draft an extra budget.'' Asked whether Japan has been pressured by the U.S. to increase spending, Tanami said ''we have not heard something like that from the U.S. side officially."

Still, U.S. Deputy Treasury Secretary Lawrence Summers Sunday night in Washington called on Japan and Europe to boost growth, warning that the global economy still faces risks. Officials close to Prime Minister Keizo Obuchi said Friday he will unveil new economic stimulus measures when he meets U.S. President Bill Clinton in Washington on May 3.

''The U.S. stance will be to keep up pressure on Japan and Europe to boost economy,'' said Chris Iggo, chief economist at Barclays Capital, who sees the dollar trading between 118 yen and 121 this week.

Finance Minister Kiichi Miyazawa will meet with Treasury Secretary Robert Rubin at 4 p.m. London time, before attending the G-7 meeting. The G-7 nations comprise the U.S., the U.K., Japan, Germany, France, Italy and Canada.

The yen also gained on expectation G-7 finance ministers won't make any statements to guide the yen lower at Monday's meeting, contrary to Japanese media reports last week, traders said.

''The Japanese like it at 120 yen,'' said Lehman's Breedon. ''We're in the range where they're not going to do anything about it."

A weaker yen could help the country's stagnant economy by making Japanese exports more competitive abroad and inflating revenues from overseas.

A string of national holidays in Japan, called ''Golden Week,'' begins Thursday, which means less-than-normal trading volume in Japan. At such times, currency movements can be exaggerated, traders say.

Obuchi may say he plans to draft a new budget in time for the U.S.-Japan summit meeting in May, but he probably won't announce when and how much Japan will spend to boost the economy, said Japanese government officials who declined to be identified.

Miyazawa said Friday that ''the G-7 is not the place where we are going to discuss whether the current exchange rate is appropriate.'' His remarks helped push down the dollar Friday after it climbed as high as 120.43 Thursday.

Meanwhile, traders said the euro is poised to extend the 2.5 percent decline its against the dollar since the North Atlantic Treaty Organization began bombing Yugoslavia March 24.

NATO leaders - who met in Washington for their three-day summit marking the alliance's 50th anniversary over the weekend - agreed to impose an oil embargo against Yugoslavia, enforced by NATO warships in the Adriatic Sea.

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