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Major nations join Japan to fight soaring value of yen after disasters

The crisis in Japan had pushed the U.S. dollar to its lowest levels since World War II against the Japanese yen, a trend that threatened Japan's already battered economy.

To block that damage, the Group of Seven major industrialized countries announced late Thursday a "concerted intervention" to trim the yen's gains against the dollar.

"We express our solidarity with the Japanese people in these difficult times, our readiness to provide any needed cooperation and our confidence in the resilience in the resilience of the Japanese economy and financial sector," the G-7 finance ministers and central bank governors said in a brief statement issued after an emergency telephone conference call.

Treasury Secretary Timothy F. Geithner and Federal Reserve Chairman Ben Bernanke participated in the call for the United States with their counterparts from Japan, Germany, France, Britain, Italy and Canada.

Investors had been selling off their dollars and buying yen on the expectation of a major rebuilding effort in Japan.

A weaker dollar makes U.S. exports cheaper overseas. But it also could fuel inflation at a time when prices for food and oil are already creeping up.

But after the coordinated intervention was announced early today in Japan, Japanese stocks rallied, and the yen fell against the dollar.

The dollar had fallen Wednesday to the point where $1 would buy only 76.32 yen -- the lowest level since the mid-1940s.

It rose to trade at 78.97 yen Thursday afternoon, then increased again to more than 81 after the announcement of the joint intervention.

The dollar's value against the yen has been sliding for months. But the trend accelerated following last week's devastating earthquake, tsunami and resulting nuclear crisis.

Normally, the currency of a country facing such calamities would weaken in value as investors grew concerned about weaker economic growth, said Mark Zandi, chief economist at Moody's Analytics.

"That is being overridden at the moment by the view that a lot of money will be brought back to Japan" for widespread reconstruction, Zandi said.

A weaker dollar against the yen means that Japanese autos and other goods would cost Americans more, while U.S-made cars and other products would be more competitive in Japan.

But it could also lead to inflation because the price of Toyotas and Hondas would rise.

And the price of oil, already trading at more than $100 a barrel, could rise further because oil producers are paid in U.S. dollars. So a weaker dollar would prompt Saudi Arabia and other producers to raise the price.

Currency traders had been awaiting the outcome of Thursday's conference call.

But the announcement of the coordinated intervention caught analysts by surprise. The G-7 nations had not intervened jointly in currency markets since 2000 when they worked together to bolster Europe's new currency, the euro.

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