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Miyazawa talks, yen balks
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July 31, 1998: 7:33 a.m. ET
Japan's finance minister says gov't will intervene in forex when needed
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NEW YORK (CNNfn) - Japan's new Finance Minister Kiichi Miyazawa further weakened the yen against the dollar Friday after commenting that Japan will intervene in the currency exchange market when necessary.
Miyazawa said he was among the first people to suggest that both Japanese and U.S. authorities carry out intervention, which they ultimately did in June.
"It is not a good thing, but we must intervene when (market conditions are) exceptional," he said.
But when asked how he viewed the recent weakening of the yen, Miyazawa said it was "meaningless" to comment on specific foreign exchange levels, adding that the market has its own logic. The finance minister also said he had not spoken to his counterparts, including U.S. Treasury Secretary Robert Rubin, since taking up his post.
Miyazawa's comments, which seemed to contradict his stance of "benign neglect" toward the foreign exchange market, pushed the U.S. dollar up to 144.25 against the yen in afternoon trading in Tokyo, up 1.95 from late Thursday.
But Japan Senior Ministry Official Haruhiko Kuroda later on Friday pointed out Japan's foreign exchange policy remained unchanged.
"Minister Miyazawa told me that Japan's foreign exchange policy was unchanged, and that excessive weakness of the yen was undesirable for the Japanese economy as well as for the Asian and world economy," Kuroda said.
Regarding the Japanese economy, Miyazawa said it may be difficult to achieve the government's forecast of 1.9 percent growth for this fiscal year, which started in April, if current economic trends were to continue.
Asked whether he thought it could be impossible to achieve the forecast, Miyazawa said: "If things stay as they are now, then that may be the case."
Miyazawa added that what was important was not reaching the forecast, but rather turning around the trend of negative quarter-on-quarter growth of the gross domestic product. But he said he did not know when the turnaround will occur.
Miyazawa also said he believed the total of bad loans held by Japanese financial institutions was less than $1 trillion reported by the New York Times earlier this week.
"I don't understand the basis of the figure," he said.
Miyazawa, along with Japan's new prime minister, Keizo Obuchi, has called for implementing 6 trillion yen in tax cuts to boost the nation's economy.
John Williams, Bankers Trust global economist, expressed doubt that Miyazawa's reform plans will drastically change Japan's financial predicament.
"Miyazawa was around in 1980 when the problems began," Williams told CNNfn. "The voters finally threw the bums out… but nothing has changed for the LDP.
"What they need to do is cut the consumption tax," Williams added. "Cutting the income tax doesn't help much - all people will do is save it. What you need to do is give them an incentive to spend." 
-- from staff and wire reports
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