A monitor displaying the conversion rate of the U.S. dollar against the Japanese yen is shown at a foreign exchange firm on Thursday, march 17, 2011 in Tokyo, Japan. The dollar plunged to 76.53 Japanese yen late Wednesday in New York, falling far below the April 1995 low of 79.75 yen, as leaks of radioactivity from a stricken Japanese nuclear plant have deepened the Asian country's woes following last week's massive earthquake and tsunami. [Photo: CFP]

Japanese Yen has seen a record high against the US dollar after the earthquake and fears surrounding the country's nuclear crisis.

The yen hit a post-World War II high of 76.25 to the dollar on last Wednesday, which spurred concern that the strengthening currency may reduce profits for Japanese exporters and push the world's third-largest economy into a recession.

John Foley, Hong Kong Bureau Chief of Reuters Breakingviews, said the hit to Japan's economy is not as big as people had originally expected, and will not affect the yen in the long term.

Foley said one of the factors that pushed the yen so high was a lot of Japanese investors bringing their money home for rebuilding infrastructure.

"The theory here is lots of people will basically bring money home, not just investors, but also insurance companies who have big bills to pay. So buying more yen-denominated assets pushes up the price of the yen".

The stronger Japanese currency, according to the Foley, could have a bad effect on the country's economy for a short period.

"If you have a stronger yen, then exporters, potentially, could get put out of business, because their products are more expensive overseas, and their costs don't necessarily balance out. So the worry is the economy will be hit even harder."

In an effort to stabilize the money markets, the Bank of Japan has been pouring cash into the financial system since Mar 14.

At the same time, the Group of Seven, which includes France, Germany, Italy, Japan, Britain, United States and Canada, intervened in the foreign exchange market for the first time in more than a decade to weaken the yen.

As a result, the yen fell to 81.70 against the dollar at 5pm in Tokyo on Mar 18.

In the meantime, there were a lot of arguments against the intervention, which called for market adjustment.

Foley, explaining the reason of the moves, said a bit of stability is good for Japan's economy as the country is undergoing distress after the quake.

"The problem of volatility is if you have too volatile a currency that can make things very uncomfortable for companies, for example, who don't know whether to invest or not. And generally people don't like currencies to be lurching around in an uncontrollable fashion. So that's the main justification for intervening."

The expert said there will be no longer-term repercussions for the yen. However, the economy will still feel the pressure of the yen strengthening as more people bring their money home.