Written by Takaya Yamaguchi and Laika Kihara
TOKYO (Reuters) – Japanese authorities are ready to take action against excessively speculative and volatile moves in the currency market that are hurting the economy, the country's top currency diplomat, Masato Kanda, said on Friday.
“It is not intended to change the direction of the market,” Kanda told reporters when asked about the exchange rate intervention, but rather was intended to mitigate excessive volatility in the currency market.
“As long as currency rates move stably in line with fundamentals, there is no need for intervention,” said Kanda, who is deputy finance minister for international affairs. “On the contrary, if there is excessive speculation and volatility in the market, we will take firm action.” Things.
These comments failed to prevent the yen from falling below 159 against the dollar for the first time since April 29, as markets continued to focus on the wide difference in interest rates between Japan and the United States. The price of the dollar reached 159.12 yen in Asia on Friday.
Chief Cabinet Secretary Yoshimasa Hayashi also warned yen traders against pushing the currency lower, saying authorities would continue to monitor movements in the exchange rate market.
“It is important that exchange rates move in a way that reflects fundamentals,” he said in a press conference.
Japan spent 9.8 trillion yen ($61.6 billion) to intervene in the foreign exchange market in April and May, after the Japanese currency hit its lowest level in 34 years at 160.245 to the dollar on April 29.
While these moves prevented the yen from testing new lows, they failed to reverse the currency's downward trend that is hurting households by raising the costs of fuel and food imports.
As markets watch for the opportunity for renewed intervention, a US Treasury report released on Thursday added Japan to the foreign exchange watch list alongside six countries that were on the previous list.
Finance Minister Shunichi Suzuki said on Friday that he did not believe Washington had any problem with Japan's currency policy.
“We will communicate closely with the authorities of the United States and other countries based on the G7 agreement that excessive and unregulated currency movements could have negative effects on economies,” Suzuki said in a regular press conference.
While the US Treasury said Tokyo's recent currency intervention was not a factor in deciding to add Japan to the watch list, it said intervention should be limited only to highly exceptional circumstances in large, freely traded exchange markets.
($1 = 158.9900 yen)