2:34 AM
TOKYO |
TOKYO (Reuters) - Japan tried to keep the yen in check on Tuesday as it grapples with the aftermath of a deadly earthquake and tsunami, warning markets that Tokyo was keeping a close watch on the currency and would act together with its G7 partners if needed.
In their first joint intervention since 2000, Group of Seven rich nations sold the yen on Friday after it spiked to record highs, threatening to cripple Japanese exports and deal another blow to an economy reeling from the disaster.
"We will cooperate as appropriate while closely watching market movements," Finance Minister Yoshihiko Noda told a news conference after a cabinet meeting.
The yen traded just below 81 to the dollar, well off last week's record high of 76.25, and analysts said the 80-80.85 range could serve as a floor for the U.S. currency. Noda said he would not comment on any specific levels when asked about market's reaction to the intervention.
The yen's strength, driven by speculation that Japanese firms will bring back a big chunk of their overseas investments to fund Japan's biggest reconstruction push since the post-World War Two period, is just one of Tokyo's concerns.
The authorities are also racing to avert a disastrous meltdown at a quake-crippled nuclear plant while rushing humanitarian relief to the country's northeast, where the March 11 quake and tsunami wiped out whole communities, leaving at least 21,000 dead or missing and more than 350,000 homeless.
Kyodo news agency quoted national policy minister Koichiro Gemba as saying that the government may need three extra budgets in the fiscal year starting in April.
The enormity of the task prompted Prime Minister Naoto Kan to invite the leader of the main opposition party to join the cabinet as his deputy in charge of disaster relief.
The offer was swiftly rejected, but on Tuesday Economics Minister Kaoru Yosano renewed the appeal, saying Japan should form a grand coalition to better cope with the crisis.
"I think it is best to form a grand coalition to speed up political decisions," Yosano told reporters, adding that he believed the opposition had not yet given its final word on Kan's proposal.
COALITION OFFER
Before the quake, opposition parties, which control parliament's upper house, had been blocking several bills needed to implement the 2011/2012 budget to force an early election. But since the disaster struck the opposition has declared a truce, signaling it would not hamper relief and reconstruction efforts.
The government has yet to give its estimates of the damage but Yosano told Reuters last week the total impact could exceed 20 trillion yen ($247 billion), making it by far the world's costliest natural disaster.
It looks certain that the government will end up spending much more than after the 1995 quake in Kobe when it passed extra budgets worth more than 3 trillion yen. Some estimates put the figure this time above 10 trillion, or nearly 3 percent of gross domestic product.
Kan said it was too early to talk about the size of such budgets or their funding.
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