Forex chief calls yen’s slump unusual

Japan’s top currency official says the recent yen weakness is odd and out of line with current economic fundamentals, reaffirming his commitment to act if needed to prevent excessive swings in the exchange rate.

“I strongly feel the recent sharp depreciation of the yen is unusual, given fundamentals such as the inflation trend and outlook, as well as the direction of monetary policy and yields in Japan and the United States,” says Masato Kanda, vice-finance minister for international affairs, in an interview.

“Many people think the yen is now moving in the opposite direction of where it should be going.”

Kanda’s remarks come amid intense market scrutiny over whether the government will step into the currency market to stem recent falls in the yen following the Bank of Japan’s (BOJ) decision last week to raise interest rates for the first time since 2007.

The currency slid to a 34-year low of 151.97 yen per US dollar on Wednesday, prompting Finance Minister Shunichi Suzuki to ramp up verbal warnings with his strongest hint this year that Japan could intervene.

Finance authorities also convened a three-way meeting, a gathering often used to show heightened concern among policymakers over market movements.

“We are currently monitoring developments in the foreign exchange market with a high sense of urgency,” says Kanda.

“We will take appropriate measures against excessive foreign exchange moves without ruling out any options.”

The yen has lost about 7% this year against a broadly advancing US dollar, making it among the weakest major currencies.

He says Japan is not guarding specific exchange-rate levels, but is looking at the direction and speed of movements when assessing developments in the currency market. — Bloomberg

“Many people think the yen is now moving in the opposite direction of where it should be going.” Masato Kanda