Japan issues strongest warning yet on currency market intervention

TOKYO: Finance Minister Shunichi Suzuki said yesterday last week’s meeting with his United States and South Korean counterparts has laid the groundwork for Tokyo to act against excessive yen moves, issuing the strongest warning to date on the chance of intervention.

“I voiced strong concern on how a weak yen pushes up import costs. Our view was shared not just in a meeting with my South Korean counterpart, but at the trilateral meeting that included the US,” said Suzuki yesterday.

“I won’t deny that these developments have laid the groundwork for Japan to take appropriate action (in the currency market), though I won’t say what that action could be,” he said.

The fresh warnings came after the US dollar rose to 154.85 yen, its strongest levels against the Japanese currency since 1990, keeping markets on heightened alert for any signs of intervention from Tokyo to prop up the yen.

The US, Japan and South Korea agreed to “consult closely” on foreign exchange markets in their first trilateral finance dialogue last week, acknowledging concerns from Tokyo and Seoul over their currencies’ recent sharp declines.

The rare warning from the three countries’ finance chiefs, which was inserted in a joint statement after their meeting, was seen by some analysts as Washington’s informal consent for Tokyo and Seoul to intervene in the market when necessary.

Japan could intervene in the currency market at any time as recent yen falls were excessive and out of line with fundamentals, said ruling party executive Satsuki Katayama.

“I don’t think Japan will face any criticism if it were to act now,” he said on Monday, when asked about the timing of a possible currency intervention.

While a weak yen boosts exports, it has become a headache for Japanese policymakers as it inflates the cost of living for households by pushing up import prices.

At a regular news conference earlier yesterday, Suzuki stressed that the authorities would work closely with overseas counterparts to deal with excessive volatility in the foreign exchange market.

The latest decline in the yen comes after a string of strong US economic data, particularly on inflation, which pushed the US dollar to five-month highs and reinforced expectations that the Federal Reserve is unlikely to be in a rush to cut interest rates this year.