Japanese PM vows to combat yen's rise, announces new tax hike for reconstruction

Japanese Prime Minister Yoshihiko Noda told parliament on Friday that Japan stands ready to take all measures to tackle the yen's appreciation to record highs, suggesting further intervention by Tokyo into currency markets to cool the yen's rise. "A crisis of industrial hollowing continues in the wake of the historic appreciation of the yen," Noda said in a major policy speech at an extraordinary Diet session. The Japanese premier was referring a recent trend of large manufacturers opting to set up shop overseas, due to cheaper parts, labor and other costs, as the rapid rise of the yen has made it hard for them to compete on a global scale while based in Japan. "If big companies move their bases overseas, their medium and small business partners will follow suit and employment that must remain in our country may disappear," Noda said. "We will take every possible measure to respond to the yen's appreciation and other issues by working together with the Bank of Japan (BOJ)," Noda said. The yen was trading close to a postwar high at 75.87 yen versus the U.S. dollar in early trade in Asia, despite the BOJ on Thursday deciding in a unanimous vote to hold its key short-term interest rate at between zero and 0.1 percent, as a means to counteract the yen's rise by making it less appealing for speculators to bet on Japan's currency, as well as increasing the size of a key asset buying program. Both the finance ministry and the BOJ are closely watching development in the currency market as the Japanese Yen is deemed safe haven against a backdrop of sovereign debt crisis in Eurozone and the likelihood of further monetary easing by the U.S. Federal Reserve.