STABILIZING THE YEN

G-7 SELLS YEN IN FIRST JOINT INTERVENTION SINCE 2000

Toru Fujioka and Mayumi Otsuma

Bloomberg, March 18, 2011

The Group of Seven jointly intervened in the foreign exchange market for the first time in more than a decade after Japan’s currency soared, threatening its recovery from the March 11 earthquake.

Japan began the effort, with Europe’s central banks following up in their markets, sending the currency down the most against the dollar since 2008. Japan’s Vice Finance Minister Fumihiko Igarashi said in an interview that he hoped the action would put a floor under the dollar-yen rate. G-7 finance chiefs said in a joint statement after a conference call they will “provide any needed cooperation” with Japan.

Japan’s central bank repeated its pledge to pursue “powerful monetary easing” as policy makers sought to reduce the threat the world’s third-largest economy sinks into a recession. The Nikkei 225 Stock Average gained after the announcements, paring losses to 12 percent since the quake and ensuing tsunami killed thousands and led to rolling blackouts and radiation leaks at a nuclear plant.

“It will be supportive for the economy if they can manage to stabilize the yen,” said Thomas Harr, Singapore-based head of Asian foreign-exchange strategy at Standard Chartered Plc. “You will have better chance of succeeding when you have the joint intervention rather than just Bank of Japan.”

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