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Tokyo • Japan waded into the currency market Wednesday for the first time in six years, buying dollars to weaken the surging yen, which is battering famed Japanese manufacturers such as Toyota and Sony after spiking to 15-year highs.
Prime Minister Naoto Kan survival of a leadership challenge the day before had driven the yen to its latest high, as currency traders bet that intervention was unlikely on his watch.
The surprise move, a coordinated effort by the Finance Ministry and central bank, indicates that a newly empowered Kan is putting his stamp on government policy and means the yen is now less of a one-way bet even if the effects of intervention prove to be short-lived. Japanese officials wouldn't provide a figure for how much yen the central bank sold on the market.
The currency has risen about 10 percent against the dollar this year, and business leaders were pressing the government for help. The yen's rise had gained momentum as worries about banks' exposure to the debt of European countries with stagnating economies triggered a search for safety. The yen and the Swiss franc have been the prime havens for investors hoping to safely park their money this summer.
A strong yen hurts Japan's exporters the mainstay of the country's still-fragile economic recovery. It erodes their foreign income when repatriated and makes their products less competitive in overseas markets. Toyota Motor Corp. estimates that every 1-yen climb versus the dollar saps 30 billion yen ($351 million) from earnings.
The government now has a "sense of crisis" about the yen, said Tomoko Fujii, a senior currency strategist at Bank of America Merrill Lynch.
The yen's rise has also underscored tensions with China. Some officials, including the finance minister, say China's purchases of Japanese government bonds might be helping to drive the yen higher, even as Beijing keeps its currency tightly controlled to protect the country's exporters. The yuan has risen less than 1 percent against the dollar since mid-June, when Beijing said it would allow it to trade more freely after keeping it virtually unchanged for 18 months.
After the Bank of Japan sold yen on Wednesday morning, the dollar jumped above 85 yen from its earlier low of 82.87 yen.
It was the first currency intervention since March 2004. Stock investors cheered the move, sending the Nikkei 225 stock average up 217.25 points, or 2.3 percent, to close at 9,516.56.