Yen Sinks Again as Japan’s Output Falls

The yen slid to new three-year lows in early trading today in Asia, after the Japanese government said industrial production fell to the lowest level in 14 years in November, led by weakness in major exporting industries.

The yen was trading at 131.21 to the dollar, compared with 130.84 in New York on Wednesday.

The currency had strengthened modestly Wednesday, halting a nine-day slide, after a Japanese finance official signaled that the government might try to slow the decline.

Some traders bought yen after Zembei Mizoguchi, director-general of the Ministry of Finance’s international bureau, told Dow Jones Newswires that “it’s not good for daily [exchange-rate] moves to be too large.” He said the ministry is “watching the situation.”

Nonetheless, many currency traders believe the Japanese government is happy to see a gradual decline in the yen’s value continue. That would make the country’s exports less expensive, helping to lift the economy out of its recession and deflationary spiral.

The yen has weakened dramatically in recent months, from 116 to the dollar in mid-September.

The government’s weak-yen policy is fraught with risk, analysts note. It could cause trade disputes to flare with Japan’s economic rivals, especially in Asia, if other countries lose substantial export sales while Japan gains sales.

But the November industrial production report suggested the Japanese economy’s situation is worsening. Production fell 1.8% last month from October, seasonally adjusted, the Ministry of Economy, Trade and Industry said. That was steeper than the 1% decline economists had expected.

As companies in such major export industries as autos and electronics cut production, they’re also firing workers.

A report today is expected to show the nation’s jobless rate climbed to a record 5.5% in November from 5.4% in October. That could deepen Japan’s recession, already 14 months old, as people spend less.

Even as a sinking yen makes Japanese exports cheaper for foreign buyers, it may lead foreign investors to shun Japanese investments, analysts said. A devalued currency means assets denominated in that currency also are devalued.

Foreigners sold $3.7 billion of Japanese stocks last week, the largest amount in any week since May 2000, Finance Ministry statistics show.

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Where the Dollar Buys More

Here is how the dollar has gained in value this year against various foreign currencies.

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Currency per dollar Dollar gain

Currency Jan. 1 Wed. against currency

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Brazilian real 1.95 2.32 +19%

Japanese yen 114.59 130.84 +14

German mark 2.08 2.23 +7

French franc 6.96 7.47 +7

Spanish peseta 176.60 189.68 +7

Canadian dollar 1.50 1.50 +7

Singapore dollar 1.73 1.84 +6

S. Korean won 1,264.00 1,303.20 +3

British pound 0.67 0.69 +3