OFFICIALS FROM THE world’s seven most developed countries have taken the almost unprecedented step of taking coordinated efforts to reduce the value of Japan’s currency, the yen.
The moves came after finance heads from the United States, Canada, the UK, Germany, France and Italy – as well as Japan itself – held a conference call to discuss how to reduce the value of the yen, which had ballooned over the week in the wake of Japan’s earthquake and resulting tsunami.
The increased value of the yen would have made Japanese exports more expensive – a move which further compounded a miserable week for Japan’s economy, given the massive financial toll of repairing the damage from the series of tsunamis.
The tactic, known as ‘currency diplomacy’, saw the value of the currency drop by almost three per cent overnight – the Wall Street Journal said one US dollar bought 81.59 yen after the intervention, compared to 79.19 beforehand
That exchange rate against the dollar had hit its highest value since the Second World War – 76.25 yen to the dollar – earlier this week.
The intervention is the first of its kind since 2000, when the leaders took similar tactics to counteract “volatility” in the price of the then-fledgling Euro.
Today’s action had followed a request from the central Bank of Japan to help stop the yen’s value from spiralling out of control, after attempts to flood the money markets with new supplies failed to reduce its value.
The Guardian adds that the Bank of Japan bought $25 billion (€17.7bn) in US dollars after the price lowered, in an attempt to restore more stability to its own cash reserves.
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