TOKYO, Aug. 24 (Xinhua) -- The Japanese government on Wednesday announced a series of steps to counter the yen's rise, including a program to encourage firms to make use of the yen's strength to buy up overseas businesses, but the emergency measures will not involve direct intervention into the currency markets.
The Finance Ministry said 100 billion U.S. dollars in low interest loans will be made available to the Japan Bank for International Cooperation (JBIC) so that the bank can lend money to companies for acquisitions or secure foreign natural resources.
The ministry said the funds would be allocated from a special foreign-exchange account and as the funds will be in U.S. dollars, foreign exchange rates are expected to work in Japan's favor.
The JBIC, according to the government, will make provisions for up to 70 percent of the financing, with private banks providing the rest, and if the entire fund is utilized the finance ministry predicts private funds to the tune of 4 trillion yen (52 billion U. S. dollars) will be converted into U.S. dollars.
"I hope this will help to address the one-sided strength of the yen,"' Finance Minister Yoshihiko Noda told reporters earlier Wednesday, while continuing his rhetoric on not ruling out another direct foray into the currency markets. He also said the special program could be extended for longer than the initial one year.
"The government will take resolute action in the foreign- exchange market if necessary," said Noda.
In addition the government is also calling on foreign exchange market dealers from major institutions to report their trading positions every day through September and more than 30 institutions will be monitored twice a day.
The Bank of Japan also reiterated its pledge to "carefully monitor the effects of developments in the foreign exchange-market on the future course of economic activity and prices."
The yen's recent surge has diminished the competitiveness and profit margins of Japanese firms selling goods and services overseas and the government fears that unless the yen's rise is curbed, there may be an exodus of key manufacturers seeking cheaper overseas locations in which to produce their goods and lower production costs, which would be to the detriment of the nation's fragile economy which is still ailing in the wake of the impact of the March 11 earthquake and tsunami.
On Aug. 4 Japan's monetary authorities launched a massive yen- selling operation in a bid to cool the Japanese currency, which had risen to near post-WWII highs, but the move had limited effect, putting further pressure on the finance ministry and the central bank to take further, more proactive steps to deal with the yen's rise.
However, the U.S. dollar was hovering around the 76.60 yen level in Tokyo on Wednesday, largely unchanged from a day earlier and the yen actually strengthened marginally, following Noda's press conference, with market players largely dismissing the latest efforts to rein-in the yen as being somewhat toothless.