Japan says it is prepared to deal with “one-sided” currency movements as the yen declines

TOKYO (Reuters) – Japan’s top currency diplomat, Masato Kanda, said on Wednesday that authorities were prepared to respond to recent “sharp and biased” moves in the yen, stepping up his warning against speculators as the currency fell below a critical level. .

Markets have been on alert in recent months for possible intervention in yen buying by Japanese authorities, who are under pressure to combat the continuing decline in the value of the currency as import prices and household costs of living rise.

The yen on Tuesday came under renewed and broad selling pressure after markets viewed the Bank of Japan’s yield control policy adjustment as insufficient to close the wide interest rate gaps that have pressured the currency for years.

“Speculation appears to be the biggest factor behind the recent currency moves,” Kanda, deputy finance minister for international affairs, told reporters about the yen’s declines.

He said the situation surrounding the yen’s movements had become “more tense” than before, adding that the authorities would “respond appropriately without ruling out any options.”

“We are on guard,” Kanda said when asked about the opportunity to intervene in yen buying, though he declined to say what kind of action authorities could take and when that would happen.

Chief Cabinet Secretary Hirokazu Matsuno told reporters on Wednesday that authorities were ready to take appropriate action “without ruling out any options” against the yen’s excessive moves.

The tone of the warnings issued by the authorities was stronger than those issued last week, when Finance Minister Shunichi Suzuki said that excessive fluctuations in the currency were undesirable and that the authorities were monitoring the movements with a “strong sense of urgency.”

The yen fell to its lowest level in a year against the dollar and touched the lowest level in 15 years against the euro on Tuesday, as the Bank of Japan’s decision disappointed the expectations of markets that were expecting a bigger step towards ending years of massive stimulus.

The Japanese currency rose 0.27% to 151.26 against the dollar on Wednesday after Kanda’s warnings, but remained close to its lowest level in a year at 151.74, which it touched the day before.

Tokyo intervened in September last year, in its first foray into the market to strengthen its currency since 1998, after the Bank of Japan’s decision to maintain its ultra-loose monetary policy led to the yen’s value falling to 145 yen to the dollar. It entered the market again in October 2022 after the yen fell to a 32-year low of 151.94.

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