Japan to Lend $100 Bil. to Weaken Yen

In an effort to weaken the strongest yen since World War II, Japan will lend $100 billion in dollar-denominated funds to businesses to help them acquire foreign companies, natural resources and energy source, under a package released Wednesday by Finance Minister Yoshihiko Noda.

The emergency facility with a total credit line of $100 billion (7.6 trillion yen) will be created within the government’s foreign exchange fund special account. Low-interest, one-year loans will be extended to private companies through the Japan Bank for International Cooperation and private-run banks in Japan.

Even without the new loan package multi-national corporations are motivated to use the strong yen to invest overseas in business acquisition and to expand production facilities. The government hopes to boost this trend in hopes of weakening the yen. Companies expanding overseas are forced to sell yen and buy foreign currencies, helping to weaken the yen.

The yen was trading at 76.64-65 to the dollar at 1 p.m. on Aug. 24, the same level as 5 p.m. Tuesday.

The government will also call on major financial institutions to report on their foreign currency reserves to the Finance Ministry by September.