Friday, September 17, 2004

Apparently, a $22.3bn quarterly current account surplus with the US just isn't good enough for Japan.
The yen lost ground in European morning trade on Friday as the market received a reminder that the Japanese authorities may not tolerate future currency strength.

Japan�s ministry of finance instructed the Bank of Japan to spend Y20bn to stop the yen from appreciating in 2003, and a further Y15bn in the first three months of 2004. Since March the pick-up in US rate expectations has allowed the yen to soften against the dollar, the main exchange rate targeted by the Tokyo authorities.

However Zembei Mizoguchi, who conducted much of the intervention in his previous role as vice finance minister for international affairs, said that despite the hiatus since mid-March, intervention had not ceased, and could resume in case of excessive volatility and disorderly moves.
The levels of Japanese intervention in currency markets are astounding, and in light of both the suddenly sluggish Japanese recovery and the insatiable US appetite for foreign savings, looks to continue unabated.

In 2004:II the US sent $12.4bn in investment income to Japan (a net income balance with Japan of -$7.7bn). The gross figure was a record by a long shot, topping by over 20% the previous high water (or is that low water?) mark of $10.3bn set in the first quarter of this year. For the year, the income balance with Japan stands at -$13.4bn. The standing annual record with the country is -$24.3bn set all the way back in 2002.

Even in real terms, we're on a record-setting pace.


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