The Japanese yen continues to plunge against the U.S. dollar, falling to its lowest levels in more than three years.
In Tuesday's trading, the dollar bought 131 yen on Asian currency markets.
The drop poses potential problems for the economy, but Japanese officials say they aren't worried. Some key Japanese officials are saying that the yen's drop in value is nothing to get overly concerned about. Shortly after the yen fell into the 130 range against the dollar, Bank of Japan Governor Masaru Hayami said the market decides foreign exchange rates and factors such as the economic crisis in Argentina might also be swaying yen-dollar movements.
Finance Minister Masujuro Shiokawa is getting much of the credit for the yen's drop, as he acknowledged when meeting with reporters on Tuesday. The Finance Minister explained that when the dollar hit 125 yen he had said that the Japanese currency still might be too strong. But, he said, it is appropriate for the yen to move in reaction to foreign exchange market forces.
The only voice of concern heard, so far, from among top government officials has been that of Trade Minister Takeo Hiranuma. Mr. Hiranuma cautioned against extreme depreciation, saying that would be bad for the economy and cause foreign traders to flee the yen.
With Japan facing record high unemployment and the country back in recession, economists agree that a weaker yen is not an unwelcome development for the world's second largest economy. A weaker yen would make the export sector more competitive as Japanese products become cheaper abroad.
But for those who import their raw materials it is a different story. McDonalds Japan President Den Fujita said at the current exchange rate, his purchasing costs will rise 20 percent. And even some major exporters have reservations. The president of Japan's top automobile manufacturer, Toyota, Fujio Cho says that while the yen's depreciation makes exporting easier, a rapid fall should be avoided for the overall good.
The yen has already lost five percent against the dollar since the beginning of December.