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Europe’s crisis a risk for Japan: Noda

The European debt crisis is the biggest risk for the Japanese economy, Prime Minister Yoshihiko Noda said on Sunday, citing it as a factor behind the yen’s strength.

‘It is risky to just stand on the sidelines and watch. This is not just about Europe, there is a possibility that it may spread to the global economy,’ Noda said. ‘Of course this is the biggest downside risk factor for the Japanese economy.’

Noda, who will attend a Group of Eight summit this month, said he hoped to discuss with the leaders ways to contain the crisis, noting Japan had made its contribution through a $60 billion pledge to the International Monetary Fund (IMF) to boost a global firewall.

While Europe must first take measures on its own to prevent contagion, Noda said other nations cannot afford to sit idle.

The prime minister said Japanese authorities were keeping a close eye on the yen’s recent rise.

The dollar has fallen back below 80 yen recently due to renewed concerns over the European debt crisis, even though a credit easing by the Bank of Japan in February lifted the dollar above 84 yen. A stronger yen makes Japanese exports less competitive and reduces the value of Japanese firms’ foreign income.

‘We need to closely monitor the market to see whether the recent moves deviate from the real state of the economy or are driven by speculative moves,’ Noda said.
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