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TOKYO : There has been more pressure on the Bank of Japan (BOJ) to loosen its monetary policy.
This comes just a week before the BOJ's next policy meeting next week.
Speaking at a parliament session on Friday, Prime Minister Yukio Hatoyama also called for firm steps to stem the strength of the yen.
There have been concerns that the strengthening yen is hurting Japanese exports, and may therefore harm the recovery of the world's number two economy.
However, up till now, the government has stayed away from intervening, or even discussing the movements in the forex markets.
The yen hit a three-month high against the dollar last week, and some traders have been gearing up for a yen rally.
Prime Minister Hatoyama on Friday said that the strength of the yen is not a true reflection of the strength of the Japanese economy.
He also said that the government and the central bank should work together to beat deflation.
Pressure has been mounting on the BOJ to take stronger action to boost the economy. And there has been talk that the BOJ will lean towards an easier monetary policy when it meets next Wednesday.
BOJ Governor Masaki Shirakawa is not giving the game away.
On Friday, he was quoted as saying that he was trying to lift demand by keeping interest rates low.
He noted that the decision would be up to his seven board members.
According to some reports, the bank wants to double its cash injection into markets from its original plan to as much as US$220 billion.
That is to keep short-term interest rates low and attract more borrowers. - CNA/ms
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