Japan boosts intervention war chest

Japan's finance minister said that Japan will secure an additional 15 trillion yen in funds it can use to intervene in currency markets, warning it will act against speculative moves on the yen. Jun Azumi on Friday added that the finance ministry will require currency traders to report daily their trading positions for another three months beyond the end of September in a bid to deter speculative moves. Japan will boost the size of its intervention funds by 15 trillion yen ($195.79 billion) to "flexibly" respond to the yen's upward trend, Azumi said. Azumi said the government will make necessary arrangement to raise intervention funds under the planned third extra budget for fiscal 2011. The move would lift the accumulated total amount the government is allowed to borrow from the market to finance intervention to 165 trillion yen. This means it would be able to raise an additional 46 trillion yen in the future if necessary because it has already used up 119 trillion of the total. In August, the ministry and the Bank of Japan intervened in the market, selling 4.51 trillion yen for dollars in a bid to weaken the Japanese unit. But the move, as with previous interventions in September 2010 and in March with the support of the Group of Seven nations, failed to deter the yen's rise to a postwar high of 75.95 against the US dollar and a ten-year high versus the euro. The strength of the unit has raised fears of a "hollowing out" of Japanese industry as manufacturers, seeing repatriated profits eroded, shift more production overseas in search of cheaper labour costs. But the yen's strength also makes foreign purchases more attractive for companies wishing to expand overseas. The safe-haven unit has surged as investors move into the currency to escape global market turmoil due to eurozone debt worries and a slowdown in the US economy. Its strength however threatens to impede Japan's recovery from the impact of the March 11 earthquake and tsunami, which devastated the northeast of the country and left 20,000 dead or missing. Demand for the yen from Japanese exporters at the end of the first fiscal half pushed the unit higher against the dollar on Friday, with the greenback retreating to 76.54 yen from 76.79 yen in New York late Thursday.