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Thursday, March 17, 2011


Japan stocks jump on G7 pledge to intervene

By Ben Rooney, staff reporter ─ March 17, 2011: 9:42 PM ET


NEW YORK (CNNMoney) -- Stocks in disaster-stricken Japan opened higher Friday after finance ministers from the Group of Seven nations announced a coordinated intervention in the currency market to prevent the yen from rising further.

The Nikkei 225 index, the most prominent measure of stocks traded in Tokyo, climbed 260 points, or 2.9%, shortly after the market opened. The Hang Seng gained 0.5%, while the Shanghai Composite was flat.

"As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability," the ministers said in the statement. "We will monitor exchange markets closely and will cooperate as appropriate."

The yen, considered a safe haven by global investors, has been driven higher in recent days by uncertainty and speculation that more cash will flow into Japan as it rebuilds.

But a strong yen is a serious threat to Japan's export-driven economy, since it undermines profits for Japanese companies that do business overseas.

The Japanese stock market has also been roiled by uncertainty this week, with investors struggling to comprehend the implications of last week's devastating natural disaster and the resulting crisis at a crippled nuclear power plant.

The Nikkei fell 1.4% in Thursday's session, giving back some of Wednesday's gains. On Tuesday, the index plunged 10.6%, marking the third worst one-day plunge in the Nikkei's history.

After a massive earthquake and tsunami devastated the northern part of the country, workers at Japan's Fukushima Daiichi nuclear power plant have been struggling to cool damaged reactors.

The Tokyo Electric Power Company said early Friday that water dumped by helicopters, fire trucks and police water cannons was "somewhat effective" in cooling the crippled reactors, housed in a facility located about 138 miles north of Tokyo.

Japan's crisis hangs over U.S.
In the currency market, the yen stabilized against the U.S. dollar Thursday after surging to an all-time high on Wednesday. The retreat came amid speculation that the Bank of Japan will soon intervene in the market to curb the yen's rise by selling the currency.

For an economy facing a tough road ahead, a weaker currency would be a good thing. A stronger home currency would make Japanese goods more expensive in overseas markets, to the detriment of Japan's manufacturing industry.

Under normal circumstances, intervention would be frowned on by other central bankers.

In the United States, stocks closed broadly higher Thursday, after two days of heavy losses on Wall Street, as investors cheered an upbeat outlook from economic bellwether FedEx (FDX, Fortune 500).


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