Word: yen
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...below the current 0.5% soon. Though rates in Japan are already almost nil, Tokyo's hand is to an extent being forced by Washington. That's because as U.S. rates fall, fewer investors are willing to hold U.S. dollar debt, which undermines the value of American currency vs. the yen - and a stronger yen is bad news for Japan. It makes the country's exports more expensive, curtailing economic growth. Credit Suisse's Shirakawa believes the chances of the BOJ returning to a zero rate is less than 50%, "because they know that a return to a zero-rate policy...
...currency continued gaining ground on the euro and British pound Monday, while a surging Japanese yen caused more trouble for Japan's export-reliant economy. That prompted the G7 to issue a statement that member nations would undertake collective efforts to undercut the value of the yen to limit the economic damage its rise has inflicted on Japan...
News that Japan's three biggest financial institutions - which have all recently invested in foreign financial institutions - were considering selling new shares to shore up their [working capital] triggered the decline. The move would dilute banks' earnings per-share, compounding investor worry that the appreciation of the yen will further reduce share value and corporate profits. Mitsubishi UFJ, like Japan's other mega-banks, avoided damage caused by the subprime crisis, but its stock portfolio is now taking a hit as the Nikkei and Tokyo Stock Price Index (Topix) continue to fall and wipe value from its balance sheet...
...government and regulators to stabilize the financial system. On Monday, Prime Minister Taro Aso called for a drafting of emergency measures, such as purchasing stocks held by banks, limiting the short selling of stocks and increasing the amount of taxpayer money to be injected into banks from 2 trillion yen to 10 trillion yen - all reminiscent of Japan's 1990s meltdown. The government action appears to be focused on preempting losses caused by share prices. Declared Aso, "Stock prices greatly influence the real economy...
...beginnings of a large-scale bailout program were finally put in place. Over the next several years, the Japanese government spent almost 47 trillion yen - or about $470 billion at current exchange rates - not only buying banks' bad assets but also recapitalizing them. Two large banks were completely taken over by the government...