Japan Economy
Japan to buy Europe bonds to soothe debt crisis - Aso
Japan's new finance minister said that Tokyo would buy bonds issued
by Europe's permanent bailout fund to help soothe the eurozone's debt
problems and stabilise the under-pressure yen.
Taro Aso told reporters the new government would tap foreign exchange
reserves to pay for the bonds, but declined to say how much it planned
to buy.
A finance ministry official told AFP the bond buying could start as
early as Tuesday, when the European Stability Mechanism (ESM) begins
selling the paper, adding that Japan "will make a purchasing decision
after seeing the terms of the issuance".
Japan, which counts Europe as a major export market, previously
bought billions of dollars in bonds issued by the ESM's predecessor, the
European Financial Stability Facility. "Stabilising Europe's financial
crisis will eventually contribute to the stability of currency (prices)
including the yen, and so we plan to keep purchasing ESM bonds using
foreign reserves," Aso said Tuesday.
Japan has suffered as demand dropped off on the debt-hit continent
and reports Tuesday said Tokyo was mulling an extra budget worth about
13.1 trillion yen ($150 billion) to boost the world's third-largest
economy.
About 40 percent of that figure would be earmarked for public works
projects, they said, as post-Fukushima Japan struggles to cement a
recovery.
The Liberal Democratic Party government, which swept to power last
month, was also eyeing a stimulus package worth at least 20 trillion yen
aimed at creating more domestic demand and new jobs, the Nikkei business
daily reported.
Europe's debt crisis has seen four countries ask for bailout cash to
help pay their bills, while there were fears that others including Italy
and Spain would follow suit as their borrowing costs surged.
However, those concerns have eased since September, when the European
Central Bank promised to buy bonds of struggling nations to keep rates
down.
Amid the turmoil, the safe-haven yen hit record highs around 75
against the dollar in late 2011, sparking panic among Japanese exporters
whose goods are made more expensive by a strong currency.
However, the unit has since weakened and dropped into a steep decline
in recent weeks as Prime Minister Shinzo Abe, who took office last month
after a landslide election win, vowed to press the Bank of Japan for
more aggressive monetary easing.
But reports Tuesday quoted Japanese executives -- who pressed
officials for months on the surging yen -- expressing concern that a
further quick drop in the currency could shake investor confidence,
dealing a blow to the economy.
A weaker currency also makes fuel imports, which have risen steeply
in the wake of Japan shutting down its nuclear plants after the 2011
crisis at Fukushima, more expensive.
In Tokyo forex trading on Tuesday afternoon, the euro was up slightly
at 114.83 yen from 114.75 yen before Aso's comments, while the dollar
bought 87.43 yen from 87.48 yen in morning deals.
Europe's permanent bailout fund was initially supposed to come online
in July but only became operational in October after it was delayed by a
challenge at the German Constitutional Court.
AFP
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Heads of Japans three economic
organizations, Hiromasa Yonekura (C), chairman of Keidanre n
(the Japan Business Federation), shakes hands with Yasuchika
Hasegawa (R), chairman of Keizai Doyukai (the Japan
Association of Corporate Executives), and Tadashi Okamura
(L), chairman of the Japan and Tokyo Chambers of Commerce
and Industry as they hold a press conference after a New
Years party at a Tokyo hotel on
January 7, 2013. Japans major business lobbies said they
support Prime Minister Abe for his efforts to revive the
dwindling economy, urging him an early participation in a
Pacific-wide free trade deal. AFP |
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