Gov't, export-oriented Japanese firms fret about yen's steep rise+

TOKYO, Sept. 28 Kyodo -
The yen's sharp appreciation to a nine-month high against the dollar Monday
triggered government concern about volatility in the currency market with
Finance Minister Hirohisa Fujii calling the rise ''one-sided'' and the industry
ministry saying it will study the potential impact on Japanese exports and
corporate incomes.

Major Japanese export-oriented auto and electronics makers were also rattled as
fears spread that nascent signs of recovery in corporate earnings could be
snuffed out by the stronger yen.
The yen appreciated sharply due partly to Fujii's repeated comments in the
recent past suggesting reluctance regarding currency market intervention to
weaken the yen. The dollar fell as low as 88.23 yen at one point in Tokyo
trading Monday.
''Exchange rate stability is desirable,'' Fujii said in late morning as he
sought to calm market jitters. ''The yen has been rising somewhat
one-sidedly.''
Meanwhile, Fujio Mitarai, chairman of the Japan Business Federation, also known
as Nippon Keidanren, told reporters that he does not believe Japan's currency
policy has changed drastically, saying Fujii's views were only stated in
''general terms.''
''I think it's normal not to carry out (market intervention) unless there are
particularly drastic fluctuations,'' said Mitarai, also chairman of Canon Inc.
''We should sit tight for now.''
However, export-oriented businesses remained jittery.
''An abrupt appreciation of the yen will be tough for the Japanese economy,''
said Yukitoshi Funo, Toyota Motor Corp.'s executive vice president.
With many Japanese companies projecting the dollar to trade around the lower to
mid-90 yen range for the current business year through next March, market
concerns have focused on how far a stronger-than-expected yen will erode
earnings made abroad when repatriated.
The key Nikkei index slipped briefly below the 10,000 line for the first time
in over two months during intraday trading Monday, reinforcing fears that
Japanese exporters will be hit hard by the double whammy of a stronger yen and
weak equities especially ahead of the upcoming earnings results for the April
to September period.
And while firms are taking measures like shifting manufacturing sites overseas
and procuring materials from abroad to hedge against foreign exchange risk,
some officials said even those steps may not be enough in the face of such a
drastic appreciation of the yen.
''The (currency) movement is too rapid,'' an official at a major Japanese
electronics company said. ''There is little the companies can do on their
own.''
Honda Motor Co. President Takanobu Ito said the currency rate will greatly
impact whether Japanese companies can keep their manufacturing bases at home,
emphasizing that some production needs to stay within Japan.
''I sincerely hope Japan will remain a country where manufacturing sites can be
maintained on a stable basis,'' Ito told Kyodo News.
With a 1 yen rise against the dollar, Toyota will suffer a 30 billion yen drop
in operating profit, while Honda will see a 12 billion yen fall. Among
electronics makers, Hitachi Ltd. anticipates operating profit would be reduced
by 2.9 billion yen, while Panasonic Corp. expects a decline of around 2 billion
yen.
Also Monday, Economy, Trade and Industry Minister Masayuki Naoshima ordered
ministry officials to look into any negative fallout on domestic industries
from the yen's recent strength.
Yosuke Kondo, a parliamentary secretary of the industry ministry, said Naoshima
sees the need to ''closely watch'' the situation, adding that the government
recognizes that ''volatility (in the currency market) is unfavorable not only
for companies...(but also) stock markets'' and people's lives.
Meanwhile, some Japanese importers such as retailers are pinning their hopes on
the merits of a stronger yen since the prices of imported seafood products like
crab and tuna are expected to be lower ahead of the year-end shopping season.
''We're starting negotiations for bringing down the costs with the stronger
yen,'' a senior official at supermarket chain operator Daiei Inc. said.
Travel agencies are also hoping that the yen's rise will boost overseas travel
demand since it will be possible to shop abroad at cheaper prices.
==Kyodo