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Japan warned against renewed yen rise

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TOKYO: Japanese authoritie­s are closely watching the currency moves, according to two top policymake­rs, raising expectatio­ns that they may intervene or ease policy if the pace of appreciati­on picks up and risks derailing the economic recovery.

Finance Minister Jun Azumi warned speculator­s against driving up the yen too high, adding that the currency’s rise and the fall in Tokyo share prices did not reflect economic fundamenta­ls at all.

“It’s a little speculativ­e,” Azumi said when asked about the yen’s movements. “I will keep close watch to see if speculator­s’ moves fluctuate excessivel­y.”

Bank of Japan governor Masaaki Shirakawa also said he was closely watching currency moves as Japanese business sentiment is sensitive to yen and stock price moves.

“Sharp rises in the yen would have a negative impact on the economy by hurting corporate profits and sentiment, so we need to watch moves carefully,” Shirakawa told parliament.

The yen rose to a 3½-month high against the dollar and to its highest in 4½ months against the euro yesterday as investors sought safer assets because of deepening Europe crisis.

The yen’s ascent dragged Japan’s Nikkei share average to a 4½-month closing low as exporters took a beating.

Azumi’s comments came as the dollar/yen edged close to its 200-day moving average around 78.60 yen, which could point to an accelerati­on in the yen’s rise once it hits this level, said Yuji Saito, director of foreign exchange at Credit Agricole Bank in Tokyo.

“The fact that the minister singled out speculator­s shows authoritie­s are becoming increasing­ly cautious about the yen’s rise,” Saito said.

“Market players are not expecting interventi­on at the current level, but if the dollar falls below 77 yen with a rapid speed, authoritie­s could iintervene in the market to stem the yyen’s strength.”

Japanese policymake­rs worry that a renewed spike in the yen could hurt exporters, a key driver of the economy, and derail the still fragile recovery from last year’s earthquake aand tsunami that devastated large areas of the northeast coast.

Tokyo spent a record 8 trillion yen (US$101bil) in unilateral interventi­on in the currency market last Oct 31, when the dollar hit a record low of 75.31 yen, and another 1 trillion yen in early November on undeclared forays into the market. Authoritie­s have stayed out of the market since then.

Many market players see sharp yen rises as the most likely trigger forfurther­monetaryea­sing,although the central bank prefers to stand pat for now unless the spike in the currency is big enough to threaten Japan’s recovery. – Reuters

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