Japan's finance minister said Tuesday that the dollar was still the world's strongest currency and it was natural for Tokyo to keep large stockpiles of the greenback. "It is clear that the dollar is still the world's strongest currency," Finance Minister Hirohisa Fujii said at a press conference. "It is a matter of course that the country keeps its foreign exchange reserves in a strong currency." This in turn "also supports the dollar," he added.
Japan has the world's second-largest forex reserves after China. Tokyo gives no breakdown of the currencies, but most are believed to be held in dollars as a result of past intervention to sell the yen against the greenback. Fujii said countries should not seek to artificially weaken their currencies to boost the competitiveness of their exports, but also reiterated that he was not necessarily in favour of a stronger yen.
"It would have a negative impact on the world's economic and political conditions if each nation engages in a race to devalue their currencies," he said. Japan has not intervened in the foreign exchange market since March 2004, allowing the yen to find its own level against the dollar.
Fujii has said on several occasions since taking his post last month that in principle he opposes action to curb the strength of the yen, which hurts Japanese exporters' earnings. But he has also said Tokyo does not rule out stepping into the market to sell the currency "in an abnormal situation." The dollar hit an eight-month low against the Japanese currency last month, dropping below the 89 yen level, as the greenback came under broad pressure. But it has since recovered some ground, striking a five-week high of 92.33 yen early in Tokyo trade on Tuesday.
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