Japanese Prime Minister Yoshihiko Noda unveiled his first plan as premier to lessen the pain of a yen near postwar highs, including a pledge to grant “large” subsidies for domestic construction of factories.

“We have to establish a strong economic structure that won’t be affected by movements in currency markets, whether it’s a strengthening or a weakening in the yen,” Motohisa Furukawa, the economy minister, told reporters in Tokyo after the government released its interim report today on measures to respond to the yen’s appreciation.

The proposed steps follow announcements by companies including Panasonic Corp. of plans to relocate operations overseas in the aftermath of the yen’s climb. The measures don’t directly address the yen’s strength against the dollar, the primary determinant of whether companies move their factories abroad, according to economist Noriaki Matsuoka.

“It looks like the yen’s going to stay in the 70s range, and there’s a big risk we’ll see an acceleration of overseas shifts next year if that holds true,” said Matsuoka at Daiwa Asset Management Co. in Tokyo. “This won’t lead to a reversal in the yen’s strength, but this was all that the government could do for now.”

Japan’s currency traded at 76.52 to the dollar at 3:38 p.m. in Tokyo compared with 76.58 in New York yesterday. It climbed to a post-World War II high of 75.95 to the dollar last month, threatening to hurt exports and derail the nation’s recovery from the March 11 earthquake.

‘Not Sustainable’

Nissan Motor Co. Chief Executive Officer Carlos Ghosn said “we can not judge, we can only see the results” of government measures unveiled today. He also said the strong yen was “not sustainable.”

A trade ministry survey this month showed that about 15 percent of large Japanese manufacturing companies expect operating profit to drop 20 percent or more if the yen is at 76 per dollar.

Panasonic, the world’s largest maker of rechargeable batteries, is moving the the headquarters of its $57 billion procurement operation to Singapore from Osaka in the year starting April 2012, Masaaki Fujita, an executive in charge of the business, said last week.

Elpida Memory Inc., the world’s third-largest memory chipmaker, said this month it may shift some domestic production to Taiwan.

In addition to seeking an increase in subsidies for building factories in Japan, the government aims to create jobs and to support the finances of small- to medium-sized companies hurt by the strong yen, the statement said. It didn’t say how much spending is planned for the measures.

’Double Punch’

The government also wants to aid a local tourism industry that’s suffered from a “double punch” of the yen’s appreciation and the March disaster, it said. Furukawa said he met with other economic policy ministers today to discuss the report. Noda’s administration was launched Sept. 2.

Japanese policy makers will take “bold” action if needed on currencies because excessive moves in exchange rates could damage the economy and financial markets, the report said. The Japanese government sold 4.51 trillion yen ($59 billion) during intervention in the currency market last month, the most since 2004.

The government also said it expects the Bank of Japan (8301) to take “appropriate and bold” measures when needed.

Economic Contraction

Japan’s economy shrank at a 2.1 percent annual pace in the three months through June, the third straight quarter of contraction. Government data suggest that the global slowdown may weigh on Japan’s recovery, with industrial output and machinery orders both weaker than economists forecast.

“Less resilient” overseas economies and the yen’s swings are among risks to the outlook of the Japanese economy, which is picking up even as post-disaster difficulties abound, the government said in its monthly economic report today.

Japan’s government plans to complete the strong yen steps as early as this month after receiving feedback from lawmakers in the ruling Democratic Party of Japan, Kyodo News reported today, without saying where it got the information.

Bloomberg