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Japan gov't, BOJ to cooperate for forex stability after yen's recent rise

Senior officials from the Finance Ministry, the Financial Services Agency and the Bank of Japan meet on Jan. 7, 2021, at the ministry in Tokyo. (Kyodo)

TOKYO (Kyodo) -- The Japanese government and Bank of Japan reaffirmed Thursday they will cooperate to ensure stability of the foreign exchange market following the yen's recent rise to a 10-month high against the dollar.

    "The stability of financial markets is extremely important," Kenji Okamura, vice finance minister for international affairs, told reporters after a meeting with senior officials of the BOJ and the Financial Services Agency.

    "We will continue to closely monitor market and economic developments and work together if needed," he added.

    The first three-way meeting since July last year comes after the U.S. currency briefly dropped to 102.60 yen on Wednesday, the lowest since March, as uncertainties over the economic outlook on the back of the new coronavirus pandemic helped make the Japanese currency further attractive as a safe-haven asset.

    A strong yen undermines the price competitiveness of Japan-made products overseas and reduces exporters' profits earned abroad when repatriated.

    Prime Minister Yoshihide Suga declared a state of emergency in the Tokyo metropolitan area the same day over a recent spike in coronavirus infections at a time when Japan's export-oriented economy is in a critical stage for recovery from the pandemic.

    The government's second emergency declaration is set to run from Friday through Feb. 7, entailing asking residents to stay at home and restaurants and bars to stop serving alcohol by 7 p.m. and close by 8 p.m.

    Japan's first emergency state was declared in Tokyo and six prefectures in early April last year and was expanded nationwide later that month. It was completely lifted in late May.

    The world's third-largest economy shrank an annualized real 29.2 percent in the April to June period from the previous quarter, the sharpest contraction on record dating back to 1955. But the economy was brought on a recovery track in the following quarter.

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