The Japanese Finance Ministry has announced a $100 billion loan fund to boost the country’s spending on foreign corporate acquisitions and resources. The actual intention is to help the yen weaken and improve the country’s economy, dominated by exports.
“Taking into account that there is a lopsided rise in the yen, I felt that swift measures were needed,” Yoshihiko Noda, the finance minister, told the press.
The government will increase monitoring of financial markets by asking institutions to announce the positions held by their currency dealers.
The announcement had little immediate effect on the yen, underlining just how complicated the weakening of the currency may be for the government, The New York Times comments.
The idea of the authorities, under the new program, is to send foreign currency to the Japan Bank for International Cooperation which will then grant loans to commercial banks. In the end, the money will be directed to the companies which want to make overseas investments. The Finance Ministry wants to flood the market with yen used to buy dollars and other foreign currencies, hoping that this will weaken the Japanese currency.
The strong yen is a burden for Japan’s exporters because it raises their costs and makes their product less competitive abroad. Moreover, the value of their earnings is decreased when repatriated home and converted into yen.