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Mark gains vs yen as Japan tightening fears wane

TOKYO: The German mark has risen against the yen recently, but dealers say this is largely due to the weakness of the Japanese currency and that the mark itself lacks the intrinsic strength to climb much higher.

The yen's value has been sapped by fading expectations of a Japanese credit tightening, allowing the mark to benefit.

"Both mark/yen and dollar/yen movements are guided by the yen. The mark itself is not strong at all," said Tohru Itami, assistant general manager at Yasuda Trust & Banking Co.

Dealers said the mark's rise against the yen was mainly a correction to a steep fall back in April, when heightened expectations of an imminent credit tightening by the Bank of Japan (BOJ) triggered buying of the Japanese currency, resulting in a weaker mark and dollar.

In late Tokyo trade on Wednesday, the mark was standing at around 70.32 yen, up from around 68.30 yen at the end of April.

"Now that expectations of a tightening have quietened down, what we're seeing is selling back of the yen," said Michiko Kawai, senior customer dealer at Dresdner Bank AG in Tokyo.

The market's views on the Japanese interest rate outlook have swung back and forth but now the pendulum of opinion points to the central bank deferring an interest rate rise at least until the autumn, dealers said.

On May 15, BOJ Governor Yasuo Matsushita said that although Japan's economy was gradually recovering, it still needed monetary support. His remarks dampened talk of an imminent tightening, set off ironically by Matsushita's own comments back in April.

Matsushita said on April 3 that it was natural for interest rates to rise on the back of expectations of economic recovery.

The currency market took that to mean that the central bank could tighten its grip on credit if Japan's tentative economic recovery was confirmed through the BOJ's quarterly business survey, the "tankan", due out on June 7.-Reuter