Japanese premier looks to establish yen as third currency pillar
Japanese Prime Minister Mr Keizo Obuchi has said that Japan urgently needs a stable yen standing alongside the dollar and the euro at the heart of a new global financial system.
But on the eve of a week-long visit to France, Italy and Germany, Mr Obuchi admitted he was fighting a rearguard action to make the yen an international currency following the launch of the euro.
Asked whether Tokyo had not waited too long to put the yen on the world stage, he said: "To be candid, what you say is right. We have been dominated by the dollar-oriented economy."
The euro was likely to be one of the two key currencies, the premier said, and Japan felt a "sense of urgency" in making the yen a fully-fledged third pillar of a monetary system which was no longer totally dollar-dominated.
"Instead of having just two key currencies, it will be important to see the world foreign exchange market based on three key currencies," he said, noting that the yen now held only a 5 per cent share of global transactions.
"Having three key currencies, rather than two, would serve to further diversify exchange rate risks," Mr Obuchi said.
Japan needed a stable currency, the premier said, as the yen soared to a two-year high of 110.70 to the dollar before easing slightly in Tokyo trade - far from last year's eight-year lows of more than 145 to the US currency.
"Fundamentally it would be desirable for the yen exchange rate to remain relatively stable," Mr Obuchi said.
"A gain in the yen's value can be seen as a reflection of the market's appraisal of the strength of the country. And, therefore, certainly I will not deny that appraisal," the premier said.
"On the import side, people may feel benefits. But on the export side, the value of their shipments will be cut," he added.
Many economists say a strong yen will dash any chance of escape from recession in Japan this year, but the premier said he was confident of engineering a recovery.
"The fiscal situation is extremely tough," he conceded, noting that the country's stock of debt was forecast to rise to 108.5 per cent of annual gross domestic product.
Nevertheless, Tokyo had implemented the largest tax cuts on record along with huge government spending.
"If all these measures are implemented I am convinced that the 0.5 per cent growth target can be achieved," he said, adding there were already "signs of movement" in the economy and Tokyo had no plans for more tax measures.
Japanese officials have been quoted in the local press as saying the premier would call in a key Paris speech for a new monetary system with a loose exchange rate grid between the dollar, euro and yen.
Mr Obuchi said he was still finalising his plans, while stressing that "the government is ready to do whatever it can do" for the internationalisation of the yen.
The time had come for Japan to reflect on its standing in the world, Mr Obuchi said.
"Since the end of the second World War, Japan has been openminded by accepting American culture and very strong economic ties with the United States," he said.
"I believe we should adopt those standards that are useful. But it can be time to stop and reflect upon ourselves. We may have to think hard about what we should do in order not to lose our culture and traditions."