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Japan warned against renewed yen rise
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