Japanese officials stepped up a campaign yesterday aimed at persuading financial markets that the US and Japan were moving towards co-ordinated action to reverse the yen's recent rally.
Pressure from Tokyo for the US to carry out joint currency market intervention to weaken the yen and head off any threat to nascent recovery in the Japanese economy is likely to be a key issue at a meeting of finance ministers from the Group of Seven leading industrial nations next weekend.
Mr Keizo Obuchi, Japan's prime minister, warned that Japan was prepared to use every step to weaken the yen, "including co-operation with other countries". Mr Kiichi Miyazawa, the finance minister, signalled that senior Japanese officials were discussing joint intervention with their US counterparts.
The US authorities gave no public indication that they would rapidly bow to the Japanese demands. Nonetheless, the comments by Japanese officials helped weaken the yen to around Y107 to the dollar in late Tokyo trading some Y2 weaker than the previous day, and up from the three-and-a-half year high of Y103.25 hit last week. At midday in New York the yen was at 106.80.
US officials have repeatedly expressed their scepticism of the effectiveness of foreign exchange market intervention. It is not clear that the US yet views the dollar's weakness against the yen as anything more than a Japanese phenomenon driven by a recovering economy and reviving foreign investment.
But the US may develop concerns about a weakening dollar, which could put increased pressure on the Federal Reserve to raise interest rates.
When the US last agreed to joint intervention, it required other monetary and fiscal policy action by the Japanese authorities.
Japanese diplomats yesterday admitted that their attempts to lobby for US support were still being complicated by the stance of the Bank of Japan.
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