Trade minister: yen shouldn't weaken more

By staff and wire reports

TOKYO, Japan - Japan's trade minister said Monday that he does not want to see the yen decline against the dollar any further.

"A weaker yen has both positive and negative aspects for the Japanese economy, but it is not very desirable for it to go further from here," Takeo Hiranuma said, according to Jiji news service.

The yen was trading at 129.52 at midday Monday, just below the three-year weak level it set last week. It has weakened dramatically in the last month.

The yen traded as high as 129.69 against the dollar on Friday. It stood at 123 against the greenback recently as November 28, and was at 120 at the start of that month.

Sudden moves in the currency make it harder for companies doing business with Japan to adjust. The yen has also started to pressure currencies like the Korean won and Taiwan dollar.

Officials have driven the currency's weakening, with a series of comments suggesting they appreciate it. A weaker yen makes Japanese exports more attractive abroad, at a time little is going right for Japan's economy.

Shiokawa: market responding "rationally"

Finance Minister Masajuro Shiokawa said Friday the government isn't driving the yen's weakness. But the currency's decline is reasonable, he said, a response to economic fundamentals.

"I think the market is reacting rationally," he said, according to Reuters news agency. "We are not intending to drive the yen lower. I think it shows the market reacting to the Bank of Japan providing more liquidity."

Poor economic fundamentals and worries about Japan's banks are the underlying reasons for the currency's decline. Japan is suffering through its fourth recession in a decade, and its banks are battling a rising portfolio of bad loans.

Unemployment is at an unprecedented 5.4 percent. Bankruptcies are up. Fourteen public companies have gone under this year, as banks rein in their lending. And investors expect more failures.

Although Japan's economy is laboring, the government is pushing ahead with reforms and efforts to curb spending. Previous governments have tried to spend their way out of trouble.

The cabinet on Monday approved a draft budget for the fiscal 2003 year that cuts spending by 1.7 percent, for the second consecutive year of declines.

The outline pegs Japan's spending for the year starting April 1, 2002, at 81.2 trillion yen ($627 billion).

Japan's stock markets were closed Monday for a holiday in honor of Emperor Akihito, who celebrated his 68th birthday on Sunday.

Reuters contributed to this report.