No plans yet to cut yen forex reserves, says BI
No plans yet to cut yen forex reserves, says BI
The Jakarta Post, Jakarta
Bank Indonesia said it had no plans yet to cut its yen
denominated foreign exchange reserves in reaction to Japan's
policy to weaken the yen in favor of boosting its export sales.
Bank Indonesia Governor Sjahril Sabirin said the central bank
was monitoring daily the need to decrease or increase its yen
reserves.
When asked last week whether Bank Indonesia would cut its yen
reserves, he said, "not just yet".
Japan has been devaluating the yen in an effort to boost
export sales, and pull its economy out of a recession.
This month alone the currency lost 7 percent of its value as
it sank to around 131 against the U.S. dollar, the lowest level
in over three years.
A lower yen would reduce the overall value of Bank Indonesia's
foreign exchange reserves, which amounts to about US$28 billion.
Bank Indonesia officials refused to say how much yen the
country's foreign reserves was holding.
In the late eighties, Bank Indonesia is said to have suffered
heavy losses when it was too late in converting its devaluated
yen reserves into dollars. At that time, the yen's fall had
already hit its bottom.
While the current steep fall of the yen raises concerns on the
dollar value of the country's foreign reserves, a rise in the yen
could be even more worrisome.
A stronger yen would add to the country's debt burden as a
portion of yen-denominated debts are paid back in dollars.
In the mid-nineties, a sharp surge in the yen against the
dollar sent Bank Indonesia scrambling to raise its yen base
reserves.
Former Bank Indonesia's governor Soedradjad Djiwandono has
said that following the surge in the yen, the central bank raised
the yen portion of the country's foreign reserves to 36 percent
in 1996, from 27 percent in 1993.
Meanwhile, Sjahril added the weakening of the rupiah last week
was more driven by local trading factors than the yen's fall.
Currency analyst Farial Anwar concurred saying the weakening
of the yen had had only a minor impact on the rupiah's movements.
While other East Asian currencies tracked the yen's fall, he
said, the rupiah had moved within an isolated trading range.
"The rupiah is moving on its own without influence from its
regional peers," Farial explained.
Dealers have said that local companies were seen buying the
dollar so that they can pay their foreign debts maturing next
year.
He said the central bank should also maintain the current yen
composition in its foreign exchange reserves.
According to him, not only is the current yen composition
small, the Japanese currency may have also stop depreciating.