G-7 countries announce joint currency intervention
On Thursday March 17, 2011, 9:03 pm
WASHINGTON (AP) -- Finance officials from the Group of Seven major industrialized countries on Thursday agreed on a coordinated effort to weaken the Japanese yen, which has surged to record levels following last week's earthquake and tsunami.
A super-strong yen could cripple Japanese exports, further worsen the economic impact of the disaster that killed thousands and triggered an unfolding nuclear crisis.
The coordinated intervention in international currency markets would be the first by the G-7 countries since the fall of 2000, when the G-7 intervened in an effort to bolster the euro.
In a joint statement issued following emergency discussions, the G-7 officials said that the United States, Britain, Canada and the European Central Bank will join with Japan in a "concerted intervention" in currency markets Friday.
"We express our solidarity with the Japanese people in these difficult times, our readiness to provided needed cooperation and our confidence in the resilience of the Japanese economy and financial sector," the G-7 finance officials said in their joint statement.
The announcement came following a telephone conference call among finance officials from the G-7 nations -- the United States, Japan, Germany, Britain, France, Italy and Canada. U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke represented the United States on the call.
The announcement came just as stock trading opened in Tokyo on Friday and had an immediate positive impact. In early trading, Tokyo's Nikkei index was up about 3 percent.
The G-7 action came after the crisis in Japan had pushed the U.S. dollar to its weakest levels against the Japanese yen since World War II.
The yen's strength in the wake of the disaster has been attributed to investors expecting the Japanese to repatriate funds from overseas to pay reconstruction costs -- or in the case of insurance companies, to pay claims for the massive loss of property and life.
"As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability," the G-7 officials said in their statement. "We will monitor exchange markets closely and will cooperate as appropriate."
The action caught many analysts by surprise. They had expected the G-7 would endorse efforts by the Bank of Japan to intervene but would not authorize a joint effort to trim the yen's recent gains against the dollar.
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