The Asahi Shimbun: U.S. bonds to fuel Japan's yen-selling

[La_Serpiente]

U.S. bonds to fuel Japan's yen-selling

Don't look now, but the government is reloading for another round of foreign exchange interventions.

Having almost exhausted the 79 trillion yen it earmarked for currency interventions in fiscal 2003, and with bills calling for an additional 61 trillion yen yet to gain Diet approval, the government will soon generate 10 trillion yen through sales of U.S. government bonds to the Bank of Japan, officials said.

Rapid appreciation of the yen since the beginning of currency trading this year has prompted the government to intervene in the market several times already, nearly depleting funds set aside for such purposes.

The fear is that investors, speculating that Tokyo has reached the limit of its spending, will rush to buy yen on the assumption it will soon be free of government restraints.

Under a special-account budget that manages funding for forex interventions, the government issues special short-term securities to borrow from the private sector. The cap on borrowing requires Diet approval.

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U.S. bonds to fuel Japan's yen-selling