Business Blog Posts

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.

Global electronics and autos seem to have been most affected by the turmoil, but in an illustration of how the ripples are spreading, global miner Rio Tinto (RIO.L) warned the disruptions posed a threat to its expansion plans.

More than 10 days after a 9.0 magnitude earthquake and 10-meter tsunami struck the northeast of Japan, manufacturers are struggling to get back up to speed as factories grapple with a lack of components, power cuts and damage to infrastructure.

Such is Japan's position in the global supply chain, that companies from Apple Inc (AAPL.O) to General Motors Co (GM.N) and Nokia (NOK1V.HE) are feeling the impact.

Electronics giant Sony said it was considering temporarily moving some production overseas after five more plants, mostly in central and southern Japan, were affected by parts shortages stemming from the disaster.

"If the shortage of parts and materials supplied to these plants continues, we will consider necessary measures, including a temporary shift of production overseas," the company that makes the Playstation games console said in a statement on Tuesday.

The plants make such products as digital and video cameras, televisions and microphones, the company said in a statement.

The disaster now affects 14 of Sony plants in Japan.

TECH CHAIN VULNERABLE

Japan's grip on the global electronics supply chain is causing particular concern.

The country produces around a fifth of the world's computer chips.

It exported 7.2 trillion yen ($91.3 billion) worth of electronic parts last year, research from Mirae Asset Securities shows.

"There are a huge number of little bits of the high-tech food chain which are done nowhere but in Japan," said Sam Perry, senior investment manager of Pictet Japanese Equity Selection Fund. "Nobody else has the quality or the consistency, and in some cases the technology to do it."

Japan dominates with the supply of LCD film and sealants for semiconductors, among other areas, Perry said.

"You simply can't do high-tech without Japan."