Japan issues strongest warning yet on currency intervention

TOKYO: Japanese Finance Minister Shunichi Suzuki said last week’s meeting with his US 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 United States,” Suzuki told Parliament 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.”

The fresh warnings came after the dollar rose to ¥154.85, 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 United States, 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 are excessive and out of line with fundamentals, ruling party executive Satsuki Katayama said.

“I don’t think Japan will face any criticism if it were to act now,” Katayama told Reuters in an interview 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 Japanese authorities will work closely with overseas counterparts to deal with excessive volatility in the foreign exchange market.

“We are watching market moves with a high sense of urgency,” Suzuki told reporters, adding that Tokyo authorities were ready to take action “without ruling out any options” against excessive currency moves.

Japanese policymakers may be escalating verbal warnings ahead of Japan’s Golden Week holidays next week to keep traders on guard over the chance of intervention, said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.

“Regardless of whether there will be one, markets are certainly more alert on the chance of intervention,” he said. – Reuters