Surging yen eases as Tokyo hints of intervention

TOKYO — The yen weakened slightly against the dollar Thursday after a dramatic surge in recent days, as Japan warned of possible intervention in the foreign exchange market and ahead of an expected rate cut by the country's central bank.

The pause in the yen's climb came as Tokyo strengthened its language on the possibility of intervening to limit the currency's strength and protect Japanese exporters.

Finance Minister Shoichi Nakagawa told reporters he would "implement appropriate measures" regarding the yen's gains.

"For export manufacturers the acceleration of the strong yen is a negative factor," he said.

The Bank of Japan, which began a two-day policy meeting on Thursday afternoon, was widely expected to cut interest rates from the current 0.30 percent, which could also cause the yen to weaken as investors sold the currency and sought better rates elsewhere.

But analysts said that any action was unlikely to trigger a rebound in the yen versus the dollar.

"Action by the central bank is already largely priced into the currency," said Masafumi Yamamoto, head of foreign exchange strategy at Royal Bank of Scotland in Tokyo.

Yamamoto expects a rate of 85 yen to the dollar in the remaining two weeks of the year.

Thursday afternoon in Tokyo, the yen eased back from 13-year highs against the greenback, trading at 88.02 yen to the dollar. On Wednesday in New York the dollar fell to 87.11 yen, its weakest level since July 1995.

A stronger yen hurts Japan's export-based economy as it lowers profits from goods sold abroad. The country's major manufacturers like Toyota Motor Corp. and Sony Corp., which are also facing slowing demand overseas, have been cutting employees and slashing production.

Honda on Wednesday lowered its annual profit forecast, curtailed investment and slowed production to ride out the global slowdown. Like other exporters, the weakening dollar directly hits its bottom line — for every yen the dollar declines, Honda loses about 18 billion yen ($200 million) in operating profit.

Tokyo has increasingly hinted of intervention to prop up the dollar and provide relief to its exporters, keeping some currency traders on the sidelines.

"We will take appropriate measures, including currency intervention, at the appropriate time," said government spokesman Takeo Kawamura on Thursday, according to Kyodo news.

Earlier in the week the currency was trading above 90 yen, but then on Tuesday the U.S. Federal Reserve cut its benchmark rate to the lowest level on record, a range of zero to 0.25 percent.

The move put interest rates in Japan higher than those in the U.S., and the dollar fell as investors adjusted by buying the Japanese currency.

Analysts expect Japan's central bank to cut between 0.1 and 0.15 percentage point, which would bring Japanese interest rates in line with those in the U.S.

On the stock market Thursday, Japanese shares inched higher. The benchmark Nikkei 225 stock average ended up 0.6 percent, or 54.71 points, at 8,667.23.

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