15 Four bailed-out Wall Street banks reject California's IOUs - Ellen Brown

(1) LaRouche and his disciples are ultra-hierarchical
(2) "LaRouche, Hudson, Liu and all those apocalyptic prophets are wrong"
(3) High-Powered Money & monetizing of Budget Deficits - Michael Hudson
(4) Monetizing Budget Deficits - "Printing Money" for the public sector
(5) Quantitative Easing - "Printing Money" for the private sector
(6) Export Suplus, if brought home, acts as HPM & creates credit explosion - Richard Duncan
(7) Four bailed-out Wall Street banks reject California's IOUs - Ellen Brown
(8) The Economy Is Even Worse Than You Think - Mortimer Zuckerman in WSJ
(9) Japan's opposition party (likely next gov't) says Japan should shift foreign reserves from $ to IMF SDRs

(1) LaRouche and his disciples are ultra-hierarchical

From: Tony Ryan <tonyryan43@gmail.com>  Date: 14.07.2009 07:23 AM

> Larouche put to the test: on Finance, 9/11 and Uighurs

What his critics fail to mention is that LaRouche and his CEC disciples are ultra-hierarchical and rabidly anti-democracy and differ from their NWO colleagues only in their choice of Ultimate Grand Emperor of the Whole Entire World... our liege Lord Lyndon LaRouche.

LaRouche, for his part, simply hates all the other aspiring Ultimate Grand Emperors of the Whole Entire World... Gore, Obama, Putin, et al... and especially he hates the British Empirists, whom he blames for all discovered crimes in fact committed by the American Empire. And just to take the financial blowtorch off his pal Rockefeller, he vilifies the Hills Samuel Bank of London (Macquarie to we Aussies).

(2) "LaRouche, Hudson, Liu and all those apocalyptic prophets are wrong"

From: Max <Max@mailstar.net> Date: 14.07.2009 06:30 AM

LaRouche, Hudson, Liu and all those apocalyptic prophets are wrong and have not understood the system of the money monsters.

If they want debt cancelation they will simply issue SDRs and distribute it where ever desired and as done in march in London when they issued 750bln.

SDRs is interest free High Powered Money which can be only issued by the money monsters. Money monsters never pay interest. SDRs have no purchase power and is only designed for the balance sheet corrections. It has no other effect than preventing their organizations from bankruptcy by straightening out their books. This goes for nation states and banks.

End of last year the total amount of money created in the world was little over 900bln while the real world economy is only 10bln in size. The 750bln melted this fast difference down and corrected the balance sheets again.

It is this paper confetti with which they buy up the world and impoverish at the same time the hamsters - long as they surrender their freedom and working power for confetti.

(3) High-Powered Money & monetizing of Budget Deficits - Michael Hudson

High-Powered Money is Government debt (Treasury Bonds created ex nihilo by the Fed) held by banks, as Reserves against which they are allowed to lend about 12 times as much.

How Russia May Create a More Viable Financial and Fiscal System

by Dr. Michael Hudson, ISLET ©

April 1999

http://www.michael-hudson.com/articles/countries/9904RussiaViableFinance.html

Since the Bank of England was founded in 1694, banks in every country have tended to keep reserves in the form of Treasury bonds. National credit systems depend on the issue of such bonds by governments running deficits. Government deficits and debts thus provide national financial systems with their basic backing. (Government debt held by the banking system sometimes is called "high-powered money.")

In his General Theory of Money, Employment and Prices (1933), Keynes established what would become a half-century of orthodoxy advocating such deficits as a means of pumping money into the economy by governments monetizing their budget deficits. Pointing out that running a budget surplus drained money from the economy, he blamed the Great Depression of the 1930s mainly on the deflationary behavior of governments in this way. Yet as recently as March 29, 1999, the IMF has is reported to have demanded that Russia either run a budget surplus, or minimize its deficit.

The IMF claims that running a deficit would pose the risk of hyperinflation rather than putting erstwhile unemployed labor and capital to work. Yet every hyperinflation in history has stemmed from the international transfer problem, that is, the conversion of large amounts of domestic currency into foreign currencies. As noted above, such transfers lead to falling exchange rates and rising import prices. Domestic prices rise to reflect the higher import costs, and more money is needed to transact business at the higher price level ==

Money creation & the Money Multiplier: http://en.wikipedia.org/wiki/Money_multiplier

But, in the years before the crash, private Banks were loaning greater multiples of their reserves (HPM) than they were allowed. Basel II removed the constraints on their money-creation.

Inflationary Deception:
How Banks Are Evading Reserve Requirements And Inflating The Money Supply

By Charles T. Hatch
charliehatch@charter.net

8 May 2005

http://mises.org/journals/scholar/hatch.pdf

Viewed from a practical definition of money, the banking system appears to be engaged in a significant monetary inflation. The use of reserve-sweep programs, which started in 1994, has allowed banks to reduce the effective reserve requirement on transaction deposits (demand and other checking deposits), freeing up high-powered money for other purposes. This activity has effectively lowered the reserve ratio of banks. While this is old news, this paper examines the monetary evidence over the past decade of sweeps programs and finds there is ample reason for concern that monetary inflation is accelerating because of these programs.

(4) Monetizing Budget Deficits - "Printing Money" for the public sector

What is Monetizing Budget Deficits

http://financeinterviewstips.blogspot.com/2009/06/what-is-monetizing-budget-deficits.html

Monetizing Budget Deficits:
It is the process of purchase of government debt by the federal reserve, thus indirectly funding the deficit by printing money.

This is important as the US can go for it in the near term if the other countries in the world stop buying the US debt which they have been doing for so many years.

Posted by Indo PTC/PTR/PPC at 11:32 AM

(5) Quantitative Easing - "Printing Money" for the private sector

http://en.wikipedia.org/wiki/Quantitative_easing

The term quantitative easing describes an extreme form of monetary policy used to stimulate an economy where interest rates are either at, or close to, zero. Normally, a central bank stimulates the economy indirectly by lowering interest rates but when it cannot lower them any further it can attempt to seed the financial system with new money through quantitative easing.

In practical terms, the central bank purchases financial assets, including treasuries and corporate bonds, from financial institutions (such as banks) using money it has created ex nihilo (out of nothing). This process is called open market operations. The creation of this new money is supposed to seed the increase in the overall money supply through deposit multiplication by encouraging lending by these institutions and reducing the cost of borrowing, thereby stimulating the economy.[1] However, there is a risk that banks will still refuse to lend despite the increase in their deposits, and in a worst case scenario, possibly lead to hyperinflation.[1]

Quantitative easing is sometimes described as 'printing money', although the central bank actually creates it electronically by increasing the credit in its own bank account.[2]

Examples of economies where this policy has been used include Japan during the early 2000s, and the US and UK during the global financial crisis of 2008–2009.

(6) Export Suplus, if brought home, acts as HPM & creates credit explosion - Richard Duncan

The Dollar Crisis: An interview with Richard Duncan

November 8, 2003

http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentar y&content_idx=27975

RICHARD DUNCAN: By the early 1980s, the United States began buying much more from the rest of the world than the rest of the world bought from the United States. Obviously, this did wonders for the economies of those countries with large surpluses with the US.

As a result of those surpluses, the international reserves held by the United States' trading partners began to pile up. For example, Japan's international reserve rose from $3 billion in 1968 to $84 billion in 1989. Thailand's rose from $2 billion in 1984 to $38 billion in 1996.

In every instance, where international reserves expanded sharply, "Economic Miracles" occurred - for a while.

The economies of the surplus nations boomed for two reasons: The first and more obvious reason is that their exporters made terrific profits and employed large numbers of workers.

It is the second reason, however, that was the real spark that set off the economic boom, and it is this reason that is generally not understood.

It is as follows: when exporters brought their dollar earnings home, those dollars entered their domestic banking system and, being exogenous to the system, acted as high powered money.

The affect on the economy was just the same as if the central bank of that country had injected high powered money into the banking system: as those export earnings were deposited into commercial banks, they sparked off an explosion of credit creation. That is because when new deposits enter a banking system they are lent and relent multiple times given that commercial banks need only set aside a fraction of the credit extended as reserves.

Take Thailand as an example. Beginning in 1986, loan growth expanded by 25 to 30% a year for the next ten years. In a closed economy without foreign capital inflows, such rapid loan growth would have been impossible. The banks would have very quickly run out of deposits to lend, and the economy would have slowed down very much sooner.

In the event, however, with such large foreign capital inflows going into the banking system, the deposits never ran out, and the lending spree went on and on. By 1990 an asset bubble in property had developed. Every inch of Thailand had gone up in value from 4 to 10 times. Higher property prices provided more collateral backing for yet more loans.

(7) Four bailed-out Wall Street banks reject California's IOUs - Ellen Brown

From: Ellen Brown <ellenhbrown@gmail.com> Date: 14.07.2009 09:49 PM

http://globalresearch.ca/index.php?context=va&aid=14357

July 13, 2009 at 19:49:43

Toward a Solution to the Debt Crisis in California: The State Could Walk Away and Create Its Own Credit Machine

by Ellen Brown

Four Wall Street banks, which received $15-25 billion each from the taxpayers, have rejected California's IOUs because the State is supposedly a bad credit risk. The bailed out banks would seem to have a duty to lend a helping hand, but they say they don't want to delay an agreement on further austerity measures. State legislators are not bowing quickly to the pressure, but what is the alternative?

Four Wall Street banks, which received $15-25 billion each from the taxpayers, have rejected California's IOUs because the State is supposedly a bad credit risk. The bailed out banks would seem to have a duty to lend a helping hand, but they say they don't want to delay an agreement on further austerity measures. State legislators are not bowing quickly to the pressure, but what is the alternative?

In the latest twist to the California budget saga, Citigroup, Wells Fargo, and JPMorgan Chase (which each got $25 billion in bailout money from the taxpayers) and Bank of America (which got $15 billion) have refused California's request for a loan to tide it over until October. Until the State can get things sorted out, it has started paying its creditors in IOUs ("I Owe You's" or promises to pay bearing interest, technically called registered warrants). Its Wall Street creditors, however, have refused to take them. Why? The pot says the kettle is a poor credit risk!

California expects to need to issue only about $13 billion in IOUs through September, and all its Governor has asked for in the way of a loan from the federal government is a guarantee for $6 billion. Total loans, commitments and guarantees to rescue the financial sector and stem the credit crisis have been estimated at $12.8 trillion. But California has not been invited to the banquet. The total sum California needs to balance its budget is $26.3 billion. That is about the same sum given to Citigroup, Wells Fargo and JPMorgan in bailout money; and it is only about one-tenth the sum given to AIG, a mere insurance company. Corporations evidently trump States and their citizens in the eyes of the powers controlling the purse strings. California has a gross domestic product of $1.7 trillion annually and has been rated the world's eighth largest economy. Its 38.3 million people are one-eighth of the nation's population and a key catalyst for U.S. retail sales. When the California consumer base falters, businesses are shaken nationwide. If AIG and the other Wall Street welfare recipients are too big to fail, California is way too big to fail.

Fitch Rating Agency has downgraded California's municipal bonds to junk bond status,triple B. Why? AIG and Lehman Brothers had A ratings right up until they declared bankruptcy. California has never defaulted on its bonds, and it cannot arbitrarily decide to default; the State Constitution mandates that debt principal and interest must be paid as promised. California bonds lost their triple A rating only when the municipal bond insurers (Ambac and MBIA) lost theirs. It was these insurers, not the State of California, that got into hot water gambling in derivatives. The State Attorney General has opined that California's IOUs are valid and binding obligations of the State. In rejecting them, however, Wall Street may have ulterior motives. A lower credit rating can justify investors in demanding higher interest rates. The interest offered on the IOUs is substantially lower than the interest banks can get on triple B rated municipal bonds.

There may be deeper motives than that. Considering the enormous importance of the California economy to the country, and the relatively small sum it needs in loans, the refusal to support the State financially seems highly suspicious, especially when much more has been given to less creditworthy private institutions. The banks say they want to keep the pressure on California legislators to work it out among themselves, but what does that mean? The options are even higher taxes, even more cuts in services, or even more fire sales of public assets; in short, the sort of austerity measures expected of supplicants reduced to Third World debtor status. State legislators are understandably reluctant to crawl into that debt pit. Governor Schwarzenegger has refused to approve higher taxes, while Democratic leaders say further cuts in services could leave some Californians starving in the streets.

The Sun Could Shine Again on the Sunshine State

There is an alternative to that dark future, and perhaps it is to keep the public from waking up to it that arms are being twisted to accept the new burdens quickly. If Wall Street and the Feds won't extend credit to California on reasonable terms, the State could simply walk away and create its own credit machine. California could put its revenues in its own state-owned bank and fan these "reserves" into many times their face value in loans, using the same "fractional reserve" system that private banks use. Many authorities have attested that banks simply create the money they lend on their books. Congressman Jerry Voorhis, writing in 1973, explained it like this:

"[F]or every $1 or $1.50 which people, or the government, deposit in a bank, the banking system can create out of thin air and by the stroke of a pen some $10 of checkbook money or demand deposits. It can lend all that $10 into circulation at interest just so long as it has the $1 or a little more in reserve to back it up."

President Obama himself has acknowledged this "multiplier effect." In a speech at Georgetown University on April 14, 2009, he said:

"[A]lthough there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks; where's our bailout?,' they ask, the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth."

If private banks can leverage deposits into multiple amounts of "credit" on their books, a state-owned bank could do the same thing, and return the profits to the public purse. One State already does this. North Dakota boasts the only state-owned bank in the nation. It is also one of only two states (along with Montana) that are currently able to meet their budgets. The Bank of North Dakota was established by the legislature in 1919 to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men. By law, the State must deposit all its funds in the bank, and the State guarantees its deposits. The bank's surplus profits are returned to the State's coffers. The bank operates as a bankers' bank, partnering with private banks to lend money to farmers, real estate developers, schools and small businesses. It makes 1% loans to startup farms, has a thriving student loan business, and purchases municipal bonds from public institutions.

North Dakota is not suffering from unemployment or feeling the pinch of the economic downturn. Rather, it sports the largest surplus it has ever had. If this isolated farming State can escape Wall Street's credit crisis, the world's eighth largest economy can do it too!

(8) The Economy Is Even Worse Than You Think - Mortimer Zuckerman in WSJ

From: chris lenczner <chrispaul@netpci.com> Date: 15.07.2009 10:49 AM

JULY 14, 2009

The Economy Is Even Worse Than You Think
The average length of unemployment is higher than it's been since government began tracking the data in 1948.

By Mortimer Zuckerman

http://online.wsj.com/article/SB124753066246235811.html

The recent unemployment numbers have undermined confidence that we might be nearing the bottom of the recession. What we can see on the surface is disconcerting enough, but the inside numbers are just as bad.

The Bureau of Labor Statistics preliminary estimate for job losses for June is 467,000, which means 7.2 million people have lost their jobs since the start of the recession. The cumulative job losses over the last six months have been greater than for any other half year period since World War II, including the military demobilization after the war. The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

Here are 10 reasons we are in even more trouble than the 9.5% unemployment rate indicates:

- June's total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.

- More companies are asking employees to take unpaid leave. These people don't count on the unemployment roll.

- No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn't searched for work in the four weeks preceding the survey.

- The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.

- The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).

- The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.

- The average worker saw no wage gains in June, with average compensation running flat at $18.53 an hour.

- The goods producing sector is losing the most jobs -- 223,000 in the last report alone.

- The prospects for job creation are equally distressing. The likelihood is that when economic activity picks up, employers will first choose to increase hours for existing workers and bring part-time workers back to full time. Many unemployed workers looking for jobs once the recovery begins will discover that jobs as good as the ones they lost are almost impossible to find because many layoffs have been permanent. Instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler, closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance.

Job losses may last well into 2010 to hit an unemployment peak close to 11%. That unemployment rate may be sustained for an extended period.

Can we find comfort in the fact that employment has long been considered a lagging indicator? It is conventionally seen as having limited predictive power since employment reflects decisions taken earlier in the business cycle. But today is different. Unemployment has doubled to 9.5% from 4.8% in only 16 months, a rate so fast it may influence future economic behavior and outlook.

How could this happen when Washington has thrown trillions of dollars into the pot, including the famous $787 billion in stimulus spending that was supposed to yield $1.50 in growth for every dollar spent? For a start, too much of the money went to transfer payments such as Medicaid, jobless benefits and the like that do nothing for jobs and growth. The spending that creates new jobs is new spending, particularly on infrastructure. It amounts to less than 10% of the stimulus package today.

About 40% of U.S. workers believe the recession will continue for another full year, and their pessimism is justified. As paychecks shrink and disappear, consumers are more hesitant to spend and won't lead the economy out of the doldrums quickly enough.

It may have made him unpopular in parts of the Obama administration, but Vice President Joe Biden was right when he said a week ago that the administration misread how bad the economy was and how effective the stimulus would be. It was supposed to be about jobs but it wasn't. The Recovery Act was a single piece of legislation but it included thousands of funding schemes for tens of thousands of projects, and those programs are stuck in the bureaucracy as the government releases the funds with typical inefficiency.

Another $150 billion, which was allocated to state coffers to continue programs like Medicaid, did not add new jobs; hundreds of billions were set aside for tax cuts and for new benefits for the poor and the unemployed, and they did not add new jobs. Now state budgets are drowning in red ink as jobless claims and Medicaid bills climb.

Next year state budgets will have depleted their initial rescue dollars. Absent another rescue plan, they will have no choice but to slash spending, raise taxes, or both. State and local governments, representing about 15% of the economy, are beginning the worst contraction in postwar history amid a deficit of $166 billion for fiscal 2010, according to the Center on Budget and Policy Priorities, and a gap of $350 billion in fiscal 2011.

Households overburdened with historic levels of debt will also be saving more. The savings rate has already jumped to almost 7% of after-tax income from 0% in 2007, and it is still going up. Every dollar of saving comes out of consumption. Since consumer spending is the economy's main driver, we are going to have a weak consumer sector and many businesses simply won't have the means or the need to hire employees. After the 1990-91 recessions, consumers went out and bought houses, cars and other expensive goods. This time, the combination of a weak job picture and a severe credit crunch means that people won't be able to get the financing for big expenditures, and those who can borrow will be reluctant to do so. The paycheck has returned as the primary source of spending.

This process is nowhere near complete and, until it is, the economy will barely grow if it does at all, and it may well oscillate between sluggish growth and modest decline for the next several years until the rebalancing of excessive debt has been completed. Until then, the economy will be deprived of adequate profits and cash flow, and businesses will not start to hire nor race to make capital expenditures when they have vast idle capacity.

No wonder poll after poll shows a steady erosion of confidence in the stimulus. So what kind of second-act stimulus should we look for? Something that might have a real multiplier effect, not a congressional wish list of pet programs. It is critical that the Obama administration not play politics with the issue. The time to get ready for a serious infrastructure program is now. It's a shame Washington didn't get it right the first time.

Mr. Zuckerman is chairman and editor in chief of U.S. News & World Report.

(9) Japan's opposition party (likely next gov't) says Japan should shift foreign reserves from $ to IMF SDRs

DPJ's Nakagawa Says Japan Should Diversify Reserves (Update2)

By Keiko Ujikane and Kyoko Shimodoi

http://www.bloomberg.com/apps/news?pid=20601087&sid=aJ.CUWH3_7o8

July 13 (Bloomberg) -- Japan's opposition party, leading in polls ahead of next month's election, said the nation should consider shifting its $1 trillion of foreign reserves away from the dollar and buying International Monetary Fund bonds.

"In the medium to long term, we need to do what we can to avoid the risk of currency losses or economic turbulence that could result if the dollar were to swing," Masaharu Nakagawa, the shadow finance minister in the Democratic Party of Japan, said in an interview in Tokyo on July 9. "Many countries are starting to diversify their reserves."

Japanese investors are the biggest foreign holders of Treasuries after China with $685.9 billion of the securities in April, and Finance Minister Kaoru Yosano said last month his trust in the bonds is "unshakable." The DPJ yesterday beat the ruling Liberal Democratic Party in elections for Tokyo's city assembly, boosting its prospects ahead of national polls that Prime Minister Taro Aso today called for Aug. 30.

"The current reality of Japan's foreign-currency reserves is that their heavy weighting toward dollar assets means any fall in the dollar's value leads to valuation losses," said Susumu Kato, chief economist in Tokyo at Calyon Securities, the investment banking unit of Credit Agricole SA. "The DPJ is opposed to a foreign-currency reserve policy that is so wholly skewed to the dollar."

The yen traded at 92.39 per dollar at 2:11 p.m. in Tokyo from 92.54 late July 10. It has gained 4.3 percent this month.

‘Unshakable' Trust

Nakagawa said Japan should consider purchases of new bonds issued by the International Monetary Fund that will pay an interest rate pegged to the fund's basket of currencies -- the dollar, euro, yen and pound -- and known as Special Drawing Rights. The dollar is the principal component of SDRs. The IMF said this month it would issue bonds to its 186 members for the first time.

"We should start considering that as an option," Nakagawa said. "I am not saying we should do it right away. If everyone starts doing it all of sudden, it may sway the dollar." He didn't say Japan should sell any of its dollar holdings.

DPJ lawmaker Tsutomu Okubo, a director of the upper house's financial committee, said there's no consensus in the party on currency policy. Enhancing trust in the dollar and Treasuries is beneficial for Japan and the country shouldn't change its currency reserve allocations for the time being, he said in an interview today.

China's Reserves

China, India, Brazil, Mexico and South Africa last week challenged the U.S. dollar as the primary denomination of world reserves. In China, whose foreign-exchange reserves probably topped $2 trillion for the first time in the three months to June 30, Premier Wen Jiabao this year said he was concerned that his nation's dollar assets may decline as the U.S. sells record amounts of debt to fund stimulus spending.

Japan holds $1.02 trillion in foreign reserves, also the world's largest after China's. Losses on the holdings stood at about 21 trillion yen ($227 billion) at the end of May, according to the Finance Ministry's estimate.

Shifting reserves away from dollars "may be difficult for Japan" because it would weaken the U.S. currency and reduce the value of the country's remaining dollar holdings, said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo.

"If Japan and China do that, the impact will be huge," said Yamamoto, a former Bank of Japan currency trader.

Samurai Bonds

Nakagawa, 59, said Japan's government should ask the U.S. to sell debt denominated in yen, so-called samurai bonds, as a way to diversify reserves and promote the globalization of the yen. Japan should also aim to strengthen the Chiang Mai Initiative, an Asia-wide foreign-reserve pool, and seek the creation of an Asian Monetary Fund, he said.

Nakagawa said intervening in the currency market to smooth abrupt and volatile moves is an option, though Japan shouldn't try to push the yen up or down to achieve a prescribed level.

"If the yen were to appreciate or depreciate very steeply and the market becomes volatile, direct government intervention might be understandable," Nakagawa said. "Intervention shouldn't be used to strengthen or weaken it to a certain level."

The yen gained against all 16 of the world's major currencies in the past year. A stronger yen hurts Japanese exporters by making their products less competitive. It also lowers import costs for companies and consumers. Japan last stepped into the foreign-exchange market to sell yen in 2004.

Parliament will be dissolved July 21 to prepare for the lower-house election, Jun Matsumoto, deputy government spokesman, told reporters in Tokyo today.

A total of 23 percent of voters said they would choose the LDP, less than the 41 percent who favor the DPJ, according to a Yomiuri newspaper poll published July 10. The LDP has governed for all but 10 months since 1955. The DPJ already controls the upper house.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net; Kyoko Shimodoi in Tokyo at kshimodoi@bloomberg.net Last Updated: July 13, 2009 01:17 EDT