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Markets Close Higher, after Japan Warns of Possible Action to Curb Yen Britain Offers Assurances on Economy, Giving Respite to Markets
(35 minutes later)
TOKYO — Japanese authorities sought to avoid a second day of turmoil in financial markets on Monday following Britain’s referendum vote to leave the European Union, issuing their strongest warning yet that they were prepared to intervene in the market to curb the rise of the yen. TOKYO — After investors continued to digest the effects of a post-Brexit world, the markets took a more tempered view on Monday, a relative respite from the big, chaotic moves that followed Britain’s decision to leave the European Union.
Japanese stocks ended the day up 2.9 percent — a sign, perhaps, of a temporary respite for global markets after a chaotic day on Friday. The pound, which last week reached levels not seen since 1985, fell slightly in early European trading, and stocks in London were down about 0.4 percent. Japanese stocks ended the day up 2.9 percent.
Before trading began, Prime Minister Shinzo Abe met with officials from the central bank and finance ministry to discuss how to contain the fallout from the “Brexit” vote, which pummeled markets in Japan and elsewhere on Friday. The emergency meeting, and the message Mr. Abe delivered afterward, underscored the deep nervousness among global policy makers about the economic repercussions of Britain’s decision to end its more than four-decade membership in the European Union. Global authorities are doing their best to assure investors with promises that they are ready to intervene should the predictions of economic and financial havoc by a British exit from the 28-member bloc play out.
“There is still uncertainty and risk in the financial markets, and it’s important that we continue to work for stability,” Mr. Abe told reporters after emerging from the meeting at the prime minister’s office. Speaking before markets opened in Europe, George Osborne, the chancellor of the Exchequer, said that while Britain’s public finances would be affected by the referendum result, the broader economy was still in good shape.
He added that he had instructed the finance minister, Taro Aso, to “coordinate with the Bank of Japan and be even more mindful of movements in the markets, including the currency market.” “Our economy is about as strong as it could be to confront the challenge our country now faces,” he said. “It is inevitable after Thursday’s vote that Britain’s economy is going to have to adjust to the new situation we find ourselves in.”
That appeared to be enough to convince traders that the yen was somewhat less safe as a haven for their capital than it had appeared on Friday, when they bought up the currency in droves after selling the British pound. Japanese authorities fear an excessively strong yen hurts their country’s economy by making goods sold overseas by Japanese companies less competitive, and have intervened in the market to reverse sudden increases in its value in the past. “We were prepared for the unexpected and we are equipped for whatever happens,” he added.
The yen ticked down against the United States dollar and other currencies after Mr. Abe spoke. That, in turn, helped push the Nikkei 225 stock average up by 201 points when the Tokyo Stock Exchange opened. Mr. Osborne had fiercely campaigned for Britain to remain in the European Union, and he had warned that leaving the bloc could require an emergency budget involving spending cuts and tax increases. But on Monday, he said that any such moves would have to wait until Britain had a new leader, as Prime Minister David Cameron said he would step down by October.
Global markets were roiled on Friday after the result of the British vote a day earlier became clear. Japan was especially hard hit, with the yen jumping by about 5 percent against the dollar and 13 percent against the pound, and the Nikkei suffering its biggest one-day point drop in 16 years. Before trading began in Japan, Prime Minister Shinzo Abe held an emergency meeting with officials from the central bank and the Finance Ministry to discuss how to contain the fallout from the vote in Britain, which pummeled markets in Japan and elsewhere on Friday. Japan was hit especially hard, with the Nikkei suffering its biggest one-day point drop in 16 years and the yen jumping about 5 percent against the dollar.
On Monday, the Japanese authorities issued their strongest warning yet that they were prepared to intervene in the market to curb the rise of the yen. The authorities generally fear an excessively strong currency, which can hurt the country’s economy by making Japanese exports more expensive and consequently less competitive.
“There is still uncertainty and risk in the financial markets, and it’s important that we continue to work for stability,” Mr. Abe told reporters after a meeting at the prime minister’s office. He added that he had instructed the finance minister, Taro Aso, to “coordinate with the Bank of Japan and be even more mindful of movements in the markets, including the currency market.”
After Mr. Abe spoke, the yen ticked down against the United States dollar and other currencies. That, in turn, helped push the Nikkei 225 stock average up 201 points when the Tokyo Stock Exchange opened.