Written by Laika Kihara
STRESA, Italy (Reuters) – Japan is ready to take appropriate market action “at any time” to counter excessive movements in the yen, Japan's top currency diplomat Masato Kanda said on Friday, issuing a new warning about the chance of a renewed exchange rate. Interference rate.
Kanda also said he is in frequent and close contact with his counterparts abroad, especially in the United States, on issues including financial markets.
“Under a flexible exchange rate regime, we would not need to intervene if currency movements were stable. But if there were highly volatile movements that had a negative impact on the economy, we would have to take action, and doing so would be justified.” Kanda told reporters.
“We are ready to act at any time as needed against currency movements,” he said after accompanying Japanese Finance Minister Shunichi Suzuki in the first day’s session of the G7 finance leaders’ meeting in the northern Italian city of Stresa.
Kanda made his comments a day after US Treasury Secretary Janet Yellen said currency interventions should only be used rarely and in a well-communicated manner.
Kanda said Japan told its counterparts at the G7 meeting that there is a need for vigilance against excessive volatility in the currency market caused by speculative movements.
He added that Japan also told the meeting that it was important to “respond appropriately” to excessive and disorderly movements in the currency market that would harm the economy.
He added that Japan will push for the G7 financial leaders' statement to include language that reaffirms the group's position that excessive and volatile currency movements are undesirable.
Kanda, who oversees Japanese currency policy as deputy finance minister for international affairs, declined to comment when asked about the yen's recent declines.
The yen has lost 11% against the dollar this year amid expectations that the US Federal Reserve will be in no rush to cut interest rates, which would keep the discrepancy between US interest rates and ultra-low Japanese interest rates large.
Suspected interference
The weak yen has become a headache for Japanese policymakers because it hurts consumption by inflating the cost of raw material imports.
Japan is suspected of intervening in the currency market to support the yen on April 29 and May 2 to stop what authorities described as excessive and speculative currency movements.
While the suspected intervention has prevented the yen from falling below the psychologically important $160 line, the Japanese currency has yet to see a clear recovery. The currency price reached 156.98 per dollar on Friday, a level not far from the lowest level in more than three weeks of 157.19 that it touched on Thursday.
Markets see $160 to the dollar as a line in the sand for the authorities, increasing the chance of intervention in buying the yen. Tokyo entered the market when the Japanese currency fell below this level.
The G7 share a common understanding that stable currency movements are desirable and that countries have the authority to take market action when exchange rate movements become too volatile.
Tokyo said the G7 agreement gives it the freedom to intervene in the currency market to counter excessive yen movements.