Japan Companies ‘Crying Out’ for Action on Yen, Keidanren Says

By Toru Fujioka and Yoshinori Eki

Feb. 2 (Bloomberg) -- Japanese companies are “crying out” for the government to sell the yen, whose strength is deepening the worst recession since 1945, an official at the nation’s largest business lobby said.

“The yen is the most critical problem for exporters,” Masakazu Kubota, a managing director at Keidanren, said in an interview in Tokyo on Jan. 30. “Whether the government does it alone or in cooperation with others, they should do something about the yen,” he said. “Industry is crying out for it.”

Japan’s currency is trading near a 13-year high against the dollar, cutting the value of overseas sales at a time when exports are collapsing. Companies from Hitachi Ltd. to NEC Corp. are forecasting losses and firing workers, worsening a downturn the central bank forecasts will be the sharpest in the postwar era.

The yen traded at 89.76 per dollar at 10:16 a.m. in Tokyo from 89.92 late Jan. 30. The currency has risen 19 percent in the past year and reached 87.13 last month, the highest since July 1995.

Exporters need “the yen to be somewhere between 100 and 110,” Kubota, 55, said. “Japan’s entire economy is heavily dependent on automakers and consumer-electronics makers.”

Exports fell an unprecedented 35 percent in December from a year earlier, prompting companies to cut production at a record pace, reports showed last month.

Campaigning

Manufacturers are campaigning for the government to step into the foreign-exchange market, which it hasn’t done for almost five years. The Finance Ministry sold 14.8 trillion yen ($165 billion) in the first three months of 2004, when the currency traded around 103 per dollar.

“I want the government to call for intervention with other nations” if the yen’s appreciation continues, Fujio Mitarai, chairman of Keidanren, said on Jan. 13. Honda Motor Co. President Takeo Fukui also asked for action in December.

Honda cut its full-year profit forecast 57 percent last week and based its earnings on 96 yen to the dollar, compared with 113 a year ago. Every 1 yen gain against the dollar reduces Honda’s annual operating profit by 18 billion yen, the automaker estimates.

Hitachi last week forecast a record 700 billion yen annual loss, the biggest projection by an Asian electronics maker this year. NEC, Japan’s largest personal-computer maker, will eliminate more than 20,000 employees as it forecasts its first loss in three years, the company said on Jan. 30.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net