Forex

TOKYO (Thomson Financial) - Japan's main economic and business lobby group, the Keidanren, does not plan to call for government intervention to halt the yen's rise against the dollar -- which is currently hurting Japanese exporters -- unless the dollar drops rapidly in the near term, the head of the group said Monday.

'If the dollar takes its steep fall to such extreme levels as the lows reached in the 1990s, we may ask for some kind of a government action. But at present, we do not have such plans on our agenda,' Keidanren chairman Fujio Mitarai told a news conference.

The dollar rate reached 101.40 yen Friday, a level not seen since January 2000, compared with levels above 106 yen only a month ago. The drop in the dollar came as the surprisingly poor reading of US jobs data for February fueled hopes for rate cuts by the Federal Reserve.

Mitarai said he doubts the dollar will tumble 'sharply' below the 100 yen bar in light of current economic fundamentals.

'Japanese companies have reinforced resistance to a strong yen, given the yen's strengthening in the past. Speaking from my experience (as the former president of Canon Inc), I think most companies can realign their operations in about half a year to cope with the dollar at 105 yen or around current levels,' Mitarai said.

The stock market benchmark Nikkei 225 average, which consists mainly of export-oriented blue chips, on Monday slid 250.67 points, or 2 percent, to 12,532.13, the lowest level September 2005, as investors worried about the impact of the yen's strengthening and the worsening outlook for the world's largest economy.

Analyzing the factors behind the stock market's slump, Mitarai said quite 'a number of Japanese companies are now looking likely to report lower profits (compared with a year ago despite) higher revenues for the fourth (January-March) quarter, because of a stronger yen and deteriorating US market conditions.'

Revenues are still expected to show growth in the fiscal fourth quarter as offshore markets other than the US have stayed on solid ground, he said.

Canon, at which Mitarai is currently chairman, is a major exporter of digital cameras and office equipment. Canon president Tsuneji Uchida said in late January, when the dollar was above 106 yen, that he did not expect the dollar to fall below 100 yen.

The Keidanren also expressed its views on current dispute at parliament over the appointment of a successor to outgoing Bank of Japan governor Toshihiko Fukui. It called for a smooth transfer of the central bank helm to BOJ deputy governor Toshiro Muto, the government-nominated candidate for the next BOJ governor.

'I think the three government nominees (Muto and two deputy governor nominees) are the very best candidates. I hope they will be officially appointed smoothly after the question-and-answer session in parliament (Tuesday) and that we will avoid leaving the central bank governor's position vacant for any period.

'When central banks around the world are supposed to be communicating with one another amid uncertainties in the financial industry, we must by all means avoid leaving the BOJ governor's seat vacant and hurt the confidence of the international community in our central bank,' Mitarai said.

(1 US dollar = 102.24 yen)