Japanese yen hits the 15-year high at Y83.35 to dollar. The strength of yen played a part in the battle between the current prime minister Naoto Kan and his rival, Ichiro Ozawa. Two of them are competing over the control of the ruling Democratic Party, which the contest would be closed on Tuesday. Whoever wins the contest, the sharp rise of yen would be on the top of economic policy. The current PM, Ms Kan said he is ready to move ”decisively”, “We are doing various things so that the US and Europe won’t respond negatively, if Japan takes some sort of action.” His challenger Mr Ozawa promised to take ”all possible action” to handle the exceptional strength of yen, including intervention. Some is complaining the strength of yen weaken its export competitiveness, and may be destructive to its economic recovery. Yet, there are intense debates over the issue, is the yen strong enough to justify for intervention? Some even doubted if intervention would weaken rather than stabilize the yen. There are even questions on, is the yen really that strong now? Some use the real effective exchange rate to measure yen, which is calculated with comparing the yen against a basket of currencies (of the largest trading partners of Japan). Using the method, the result is quite different, the yen no is cheaper than that of 1990s. “Probably for Japan right now, you would expect the yen to appreciate,” Professor Kathryn Dominguez, an expert on currency intervention at the University of Michigan, said. Analyst doubts the effectiveness of intervention. “I’m very doubtful of intervention’s efficacy, because major currency markets are very large,” says Mr Tanase. “No one can control the market trend,” Junya Tanase, a currency strategist at JPMorgan, said.

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