Nikkei Up - G7 Pledge Yen InterventionJapan stocks jump on G7 pledge to intervene
By Ben Rooney, staff reporterMarch 17, 2011: 9:42 PM ET
NEWYORK (CNNMoney) -- Stocks in disaster-stricken Japan opened higherFriday after finance ministers from the Group of Seven nations announceda coordinated intervention in the currency market to prevent the yenfrom rising further.
The Nikkei 225index, the most prominent measure of stocks traded in Tokyo, climbed260 points, or 2.9%, shortly after the market opened. The Hang Senggained 0.5%, while the Shanghai Composite was flat.
Authoritiesof the United States, the United Kingdom, Canada and the EuropeanCentral Bank said in a statement that they will join with Japan in"concerted intervention in exchange markets."
"As we have longstated, excess volatility and disorderly movements in exchange rateshave adverse implications for economic and financial stability," theministers said in the statement. "We will monitor exchange marketsclosely and will cooperate as appropriate."
The yen, considered asafe haven by global investors, has been driven higher in recent days byuncertainty and speculation that more cash will flow into Japan as itrebuilds.
But a strong yen is a serious threat to Japan'sexport-driven economy, since it undermines profits for Japanesecompanies that do business overseas.
The Japanese stock market hasalso been roiled by uncertainty this week, with investors struggling tocomprehend the implications of last week's devastating natural disasterand 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 plunged10.6%, marking the third worst one-day plunge in the Nikkei's history.
Aftera massive earthquake and tsunami devastated the northern part of thecountry, workers at Japan's Fukushima Daiichi nuclear power plant havebeen struggling to cool damaged reactors.
The Tokyo Electric PowerCompany said early Friday that water dumped by helicopters, fire trucksand police water cannons was "somewhat effective" in cooling thecrippled reactors, housed in a facility located about 138 miles north ofTokyo.
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 soonintervene in the market to curb the yen's rise by selling the currency.
Foran economy facing a tough road ahead, a weaker currency would be a goodthing. A stronger home currency would make Japanese goods moreexpensive in overseas markets, to the detriment of Japan's manufacturingindustry.
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).
-- CNNMoney's Charles Riley contributed to this report.