Japan warns of speculative moves on yen, markets fear further intervention

Japan warns of speculative moves on yen, markets fear further intervention

Written by Tetsushi Kajimoto and Lika Kihara

TOKYO (Reuters) – Japanese Finance Minister Shunichi Suzuki said authorities are ready to respond to speculative moves in the currency, in a new warning that comes days after Tokyo intervened in the foreign exchange market to stem the yen’s decline for the first time in more than two decades.

Suzuki also said at a press conference on Monday that the government and the Bank of Japan are on the same page in terms of sharing concerns about sharp declines in the currency.

“We are deeply concerned about the recent rapid and biased moves in the market, driven in part by speculative trading. There is no change in our stance on being prepared to respond when needed” to such moves, Suzuki said at a news conference. .

The comments came after the government’s decision on Thursday to intervene in the currency market to stem the yen’s weakness by selling dollars and buying yen for the first time since 1998.

The recent sharp declines in the yen, which raised the cost of living for households by boosting the prices of imported fuel and food, were partly driven by a widening difference between the strong monetary tightening of the Federal Reserve and the very loose monetary policy of the Bank of Japan.

Bank of Japan Governor Haruhiko Kuroda will address business leaders in Osaka, western Japan, later Monday where he may comment on the yen and government intervention.

The dollar rose 0.29% to 143.78 yen on Monday, extending its rally towards a 24-year high of 145.90 yen on Thursday. It fell to 140.31 on the same day after the Japanese authorities entered the market.

While stimulating government officials may keep markets on edge over prospects for further intervention, frequent intervention in the currency market and selling huge sums of dollars may be difficult due to criticism Japan may face from its G7 counterparts.

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“It is unlikely that Japan will continue to intervene to defend a certain line like 145 yen to the dollar,” Naoyuki Shinohara, a former senior Japanese currency diplomat, told Reuters.

The yen is not alone in the downward spiral. Several other currencies, including the British pound, the euro and the euro, have been hit in part by the US Federal Reserve’s aggressive interest rate increases in recent months.

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