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Soaring yen unsettles G7 leaders | |
(about 9 hours later) | |
Global finance ministers have expressed concern at the "extreme volatility" of the yen, as the Japanese currency remained near 13-year highs on Monday. | |
The comments came from heads of the Group of Seven (G7) leading industrialised nations, but they stopped short of prescribing action. | |
The yen's rise continued to hit Japanese stocks, with the Nikkei index closing at a 26-year low on Monday. | |
Japan's government said it would now move to shore up the share market. | |
The yen hit a rate of 91.93 yen against the dollar on Monday. On Friday it had touched 90.90 yen against the dollar, its highest level since 1995. | |
Global co-operation | |
The G7 leaders commented on the high value of the yen in a joint statement issued after talks in Tokyo. | |
They said they would co-operate as appropriate to bring stability to battered global markets, but did not give any specific details of how they hoped to lower the yen's value. | |
The yen's rise has concerned Japanese investors, who are worried about its impact on the country's main exporters, as it makes their products more expensive overseas. | |
As a result, Japan's main stock index, the Nikkei, fell on Monday to close at its lowest level since 1982. | |
'Tighter controls' | |
Prime Minister Taro Aso said Tokyo would move to introduce tighter controls on the short selling of stocks, and also pledged increased bail-outs for the country's banks. | |
Short selling occurs when an investor borrows company stock owned by another investor, then sells the shares in the market, hoping the price will fall. | |
If the price does fall, they then buy the shares back at the lower price, pocketing the difference. | |
Other nations, such as the UK, have already moved to put a temporary ban on short selling in financial stocks. | |
Japan's Finance Minister Shoichi Nakagawa added that he would "continue to watch currency markets with great interest". | |
The rise in the value of the yen is being driven by two main factors. | |
Firstly, like the US dollar, it is seen as a haven buy in uncertain times. | |
Secondly, the yen has risen as a result of the end of the yen carry trade, in which traders used the yen to buy currencies with higher interest rates. | |
The yen carry trade has been unwinding due to the difference between Japanese rates and those elsewhere in the world narrowing. | |
This means that traders have pulled out of investments in countries such as Hungary and Iceland, buying back the yen in the process. |