The greenback fell as low as 86.52 yen, its weakest since 1995, while the euro peaked at $1.5144. Japan's Finance Minister Hirohisa Fujii said their country will take appropriate steps to watch the Forex market more closely.
"We are currently monitoring [the yen's upward movements], and I think now is the time to be vigilant," said Mr. Fujii.
Japan has a policy since 2004 of not intervening in currency markets, and still plans to stick to it. “We are not considering intervention right now,” said Yoshihiko Noda, a deputy finance minister.
Dollar vs. Yen
Japanese authorities will control the mounting yen since the economy is in a situation of deflation, and a strong yen only worsens deflation.
Many traders, however, doubt the authorities as the weakness of yen is against a range of other currencies too.
"It's dollar weakening, not yen strengthening, so there's very little Japanese authorities can do to stop the trend," said Koichi Haji, chief economist at NLI Research Institute.
The euro has left a clear signal (for the dollar) that there will be pressure in Asian and European markets on Thursday, since markets remain closed for the Thanksgiving Day in the U.S.
"December tends to be a seasonally positive month for the euro and … in the trading week after the [Thanksgiving] holiday this move could become a larger one and extend to the end of the year," said Kathy Lien, director of currency research at GFT Forex.
A weak dollar will reduce value of overseas sales for Japanese companies.
Exports at stake
Fujii strongly recommends a stronger yen to boost domestic demand. But Japan’s exports that have slowed down due to overseas economies must start recovering. This can only be possible if manufacturers don’t shift operations abroad due to the soaring yen.
Also, it would lessen chances of Japan’s revival from the ongoing recession. A stronger yen would only bring “huge risk” to major auto companies in Japan, said COO Toshiyuki Shiga of Nissan Motor Co.
Topix--the biggest loser of the year
Investors are escaping Japanese stocks more and more as falling prices cut sales in various companies. The Nikkei declined 0.5 percent, while the broader Topix index fell by 0.4 percent. The Topix is the biggest loser this year among 40 big equity markets of the world.
Meanwhile, competitors Shanghai Composite Index and Bombay Stock Exchange Sensitive Index have gained 79 and 78 percent respectively.
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