TOKYO (MNI) – The government will urge the Bank of Japan to do the
utmost in conducting monetary policy in order to end deflation and
defend the export-led recovery from the threat of a rapid rise in the
yen against the dollar, the Asahi Shimbun newspaper reported on
Thursday.

In its economic stimulus package, whose basic plans will be laid
out next Tuesday, the government of Prime Minister Naoto Kan will stress
the need for the BOJ to work more closely together with it to ease the
pain of the high yen under the shared goal toward ending years of price
drops, the paper said.

The government will “expect the BOJ to make the maximum efforts” in
stopping a rapid yen rise from undermining sustained economic growth and
financial system stability, the report said.

The yen rose to a 15-year high against the dollar this week and hit
a 9-year peak versus the euro, prompting speculation the BOJ, on
instruction from the finance ministry, may yet initiate direct market
intervention for the first time since March 2004.

Policy options for the central bank are limited as it has already
conducted a series of measures to maintain the extremely accommodative
financial conditions.

The BOJ could expand its fund-injecting operations at the super-low
0.1% for funding needs longer than overnight but will not consider
cutting the target for the overnight lending rate from the current 0.1%,
which is the lowest possible rate without hurting money market
functions.

A sell-off in the Tokyo stock market could hurt both business and
consumer sentiment, clouding a self-sustained economic recovery, while a
drastic, one-sided surge in the yen’s value will undermine exporter
profits and thus hit the main driver behind the current modest recovery.

The government’s new economic package will include measures to help
new graduates find jobs through trial hire and internship programs,
support people living under the poverty line and back small businesses’
investment in technological development, according to the Asahi.

In order to support consumer spending, the government also plans to
extend the reward program for building ecologically friendly houses and
enhancing the energy efficiency of existing homes. The program for such
renovations will end next March and that for the construction of
single-family houses will finish June next year.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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