The U.S. dollar dived some 3 yen, and at one point sank to 95 yen Monday morning, the lowest level in Tokyo since August 1995. As market dealers anticipated further decreases, Japanese Finance Minister Fukushiro Nukaga on Monday expressed his concern over the fluctuations of foreign exchange rates, saying that the yen's sharp climb against the dollar was "excessive."
On a separate occasion Monday, Chief Cabinet Secretary Nobutaka Machimura, while voicing similar concerns, said that they were not conducive to the Japanese economy as well as the world economy at large.
In Tokyo, the yen's rapid appreciation, along with investors' mounting concerns over the U.S. economy, pushed down the 225-issueNikkei Stock Average by 454.09 points, or 3.71 percent, to 11,787.51. The index closed below the 12,000 level for the first time since August 2005.
"It's coming to a point where the dollar's weakness cannot be stemmed, which then creates a sense of meltdown in the financial markets," said Daisuke Uno, market analyst at Sumitomo Mitsui Banking Corp..
The yen could appreciate to 90-95 to the dollar, added Uno, projecting that it would send the Nikkei index down to around 10,000.
The upswing of the yen also alerts Japan's leading companies to its possible negative impact. According to a survey of 77 companies conducted by Nikkei Inc., 64 percent of business leaders are concerned that the stronger yen will squeeze their profit because of falling exports. And some 60 percent of the respondents said that falling stock prices triggered by the high yen will exert an adverse effect on the economy and consumer spending.
As the Japanese economy has been driven by robust exports, the surging yen is likely to slow down the pace of its growth.
If the yen stands at 100 to the dollar throughout the 2008 fiscal year (April 2008-March 2009), estimated the Nikkei Economic Electric Databank System (NEEDS), Japan's real economic growth rate will lose 0.2 percentage point, largely as a consequence of decreased gains of exporting companies, experts said.
When the yen gets as strong as 95 to the dollar, the loss in the growth rate will expand to 0.4 percentage point.
Source:Xinhua
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