Written by Kentaro Sugiyama and Makiko Yamazaki
TOKYO (Reuters) – Japanese Chief Cabinet Secretary Yoshimasa Hayashi said on Tuesday that authorities will respond appropriately to excessive currency fluctuations, in a new warning as the yen weakens towards 160 yen to the dollar.
Hayashi, a top government spokesman, told reporters that excessive foreign exchange volatility is undesirable because it negatively affects the demand of businesses and households.
“We are closely monitoring currency movements and will respond appropriately to excessive volatility,” he said.
His comments follow continued warnings from officials against violent fluctuations in the currency in recent days amid increasing political focus on the damage to the economy from a weak yen.
Earlier Tuesday, Finance Minister Shunichi Suzuki told TBS that currency rates should be stable and reflect economic fundamentals.
“We will respond appropriately to excessive currency movements,” he said, a view he reiterated in Seoul after attending a bilateral meeting with his South Korean counterpart on Tuesday.
The damaged yen fell near 160 yen to the dollar on Tuesday, close to its lowest level in 34 years of 160,245 yen, which prompted Tokyo to intervene in the currency worth 9.79 trillion yen ($61.33 billion) in late April and early May.
While government officials declined to comment on whether the current market moves are excessive, traders are on high alert for any intervention by the authorities.
The yen has been under pressure since the Bank of Japan this month disappointed investors by not reducing its massive bond purchases, as some had expected.
In a separate press conference on Tuesday, Masakazu Tokura, head of powerful Keidanren trade lobby, said currency interventions could be effective to some extent.
“The recent interventions (in April and May) reflected the government’s determination to prevent the yen from falling below 160 yen to the dollar,” he said.
Tokura also said interest rate differentials between the US and Japan are likely to eventually narrow, as moderate inflation in Japan will push the interest rate higher, and slower inflation in the US will lead to a lower interest rate. “In this sense, I think the difference has reached its peak now,” he added.