Ja­pan FM warns against yen rise, de­scribes moves as 'rough'

The Pak Banker - - MARKETS/SPORTS -

Ja­panese Fi­nance Min­is­ter Taro Aso said on Tues­day the yen's re­cent moves were "rough," is­su­ing a ver­bal warn­ing to mar­kets against push­ing up the cur­rency too much and erod­ing the pos­i­tive ef­fects of premier Shinzo Abe's stim­u­lus poli­cies.

"It's clear that re­cent moves have been rough. I'll keep a close watch on move­ments in the for­eign ex­change mar­ket," Aso told re­porters af­ter a cab­i­net meet­ing, when asked about the yen's gain overnight. The coun­try's top cur­rency diplo­mat Masatsugu Asakawa echoed the min­is­ter's com­ments, say­ing that he would closely mon­i­tor mar­ket moves for any ex­ces­sive ex­change-rate volatil­ity.

De­spite ver­bal warn­ing shots, the dol­lar fell below 115 yen JPY= on Tues­day morn­ing - a low not seen since Novem­ber 2014 - prompt­ing some mar­ket play­ers to spec­u­late that Tokyo may in­ter­vene in the cur­rency mar­ket to weaken the yen. "When mar­kets are in a state of panic, leav­ing things unat­tended could trig­ger a free fall in the dol­lar/yen," said Takako Ma­sai, head of Shin­sei Bank's mar­kets re­search divi­sion. "Even if Ja­pan stepped into the mar­ket solo, it would have a sig­nif­i­cant ef­fect," she said, warn­ing that a dol­lar fall below 110 yen would deal a se­vere blow to Ja­pan's ex­ports. Many Ja­panese pol­i­cy­mak­ers pre­fer to hold off on di­rect in­ter­ven­tion and hope that sev­eral rounds of ver­bal warn­ings would help soothe mar­kets, as they see re­cent cur­rency swings as driven largely by ex­ter­nal fac­tors be­yond their con­trol. The govern­ment is also wary of de­ploy­ing ad­di­tional fis­cal stim­u­lus now, when par­lia­ment is still de­bat­ing the state bud­get for the com­ing fis­cal year be­gin­ning in April. "I don't think we're in a sit­u­a­tion where Ja­pan has to ini­ti­ate fresh ac­tion," said a govern­ment of­fi­cial.

For now, pol­i­cy­mak­ers, in­clud­ing Bank of Ja­pan Gov­er­nor Haruhiko Kuroda, will likely try to keep alive mar­ket ex­pec­ta­tions of fur­ther stim­u­lus to ar­rest the risk-averse sen­ti­ment pre­vail­ing in mar­kets, an­a­lysts say.

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