TOKYO: Japanese business leaders expressed concern last week about the strong yen, and said they were worried its rise against the US dollar could nip an export-led economic recovery in the bud.

The US currency hit a three-year low of 106.06 yen last Monday. It firmed to around 106.30 yen in late Tokyo trade last Tuesday.

Traders suspected there was intervention by Japanese authorities.

A strong yen eats into exporters' US-dollar-based export incomes, and makes their products less competitive overseas.

Hiroshi Okuda, head of Japan's biggest business lobby, said last Tuesday it is vital for Japanese firms exporting to the United States that the dollar stay above 105 yen.

However, Okuda, chairman of the Japan Business Federation and also of automaker Toyota Motor Corp, told a news conference the overall impact of a weak US dollar could be mitigated for Japanese companies exporting to both the United States and Europe by the euro's appreciation.

Two other top business leaders - Kakutaro Kitashiro, chairman of the Japan Association of Corporate Executives, and Nobuo Yamaguchi, chairman of the Japan Chamber of Commerce and Industry - told the same news conference the dollar/yen rate was near the limit that Japanese exporters could endure.

Earlier, Toyota President Fujio Cho told reporters at a New Year's reception that he felt the yen was "a bit too strong" in light of Japan's economic fundamentals, and that he was concerned appreciation could hamper Japan's economic recovery.

"The current dollar level of around 106 yen could already be harsh for Japanese industries. I think a dollar/yen level of around 110 yen can be seen as comfortable for industries in general," Cho said.

But he said Toyota had taken a conservative approach in predicting its business performance in the latter half of this business year, which took into account the risk of the yen's appreciation to its current level.

The business year ends in March.

Yoichi Morishita, chairman of the board at Matsushita Electric Industrial Co Ltd, said the yen was coming closer to "a danger zone."

"If the US dollar falls to 105 yen, that would be worrisome," Morishita told reporters at the reception.

"Still, its direct impact on industry might be eased as Japanese firms have expanded their overseas production."

Nobuyuki Idei, chief executive officer of Sony Corp, another leading Japanese exporter, said he expected the yen to remain firm for some time.

"Since I became president in 1995, there have been times when the dollar/yen rate was at 78. So we can't be surprised if the rate goes to the 90-95 yen level," Idei said.

Sony, which generates nearly 70 per cent of its revenues overseas, lowered its assumed dollar exchange rate in October to 110 yen for the six months to March 31. Its previous estimate had been 115 yen.

Idei saw some positive aspects, however.

"It's not such a bad thing for the Japanese economy for the yen to be strong. Broadly speaking, a strong yen means foreign money will flow into Japan, and that might help stock prices."

Agencies via Xinhua

(Business Weekly 01/13/2004 page6)