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UPDATE 1-BOJ Shirakawa: G7 FX action helped stabilise markets

ForexApr 11, 2011 06:48AM ET
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* G7 FX move prevented negative spillovers -Shirakawa

* Adds will ensure market trust in yen is maintained (Adds details, background)

TOKYO, April 11 (Reuters) - Bank of Japan Governor Masaaki Shirakawa said the joint G7 currency intervention to stem sharp yen rises in the wake of last month's devastating earthquake played a critical role in stabilising financial markets.

Shirakawa also pledged to ensure that trust in Japan's currency is maintained by conveying to markets that the central bank will not directly underwrite government debt.

"Despite the unprecedented major earthquake and subsequent disasters and despite the fact that Japan's fiscal condition remains severe, it was still possible to issue (government)securities at low interest rates in a stable manner," Shirakawa said in a speech at a seminar on Monday.

"This was possible partly because the markets have confidence that the aim of Japan's monetary policy is ... not to facilitate government financing," he told the seminar, hosted by the Institute of Regulation and Risk North Asia.

Shirakawa is expected to travel to Washington D.C. to attend this week's gathering of G7 and G20 finance leaders, to be held on the sidelines of the spring IMF meetings.

In their first joint intervention since 2000, the Group of Seven rich nations sold the yen after it spiked to record highs days after the quake, threatening to deal another blow to Japan's export-reliant economy which was picking up from a lull when the disaster struck.

Shirakawa said the concerted G7 action not only stabilised exchange-rate moves but helped to prevent negative spillover into the stock market and other markets. (Reporting by Rie Ishiguro; Editing by Edmund Klamann)

UPDATE 1-BOJ Shirakawa: G7 FX action helped stabilise markets

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