Written by Makiko Yamazaki
TOKYO (Reuters) – Japanese Finance Minister Taro Kono said on Tuesday authorities were vigilant for sharp moves in the currency market as the yen continued to slide to a 38-year low against the dollar, but he stopped short of issuing a clear warning of intervention.
The change in daily official comments to reporters, in which warnings against intervention have become almost routine, comes as analysts question how effective such urgings are in halting sharp declines in the yen’s value.
“Foreign exchange rates are determined by the market, reflecting a complex mix of various factors, including inflation, the current account balance, market sentiment and speculative moves,” Finance Minister Shunichi Suzuki said at a regular news conference after a Cabinet meeting.
“We will continue to monitor the market closely,” he added.
Although Suzuki said there had been no change in the government’s position, the absence of the usual comments about readiness to intervene was a break in what had become almost routine for officials.
Official comments on Tuesday suggest a slight change in tone, said Yujiro Goto, managing director and chief foreign exchange strategist at Nomura.
“Repeating the same wording could inevitably weaken the impact of (the warnings),” he said, adding that investors could interpret the lack of a change in wording as meaning there would be no immediate action yet.
“But I don’t think this (the absence of intervention warnings) indicates that interventions are less likely now than they were before,” he added.
The yen fell to 161.72 against the dollar late Monday, its weakest level since 1986, keeping markets on high alert for any signs of yen buying by Tokyo to support the currency.
It has already fallen more than 12% this year as it continues to be weighed down by wide interest rate differentials between the US and Japan.
Japanese authorities, including Suzuki and top currency diplomat Masato Kanda, stepped up their warnings last week when the yen fell below 160 yen to the dollar, the latest red line drawn by traders for Japan to intervene in markets.
Suzuki said last week that authorities were “deeply concerned” about the impact of “rapid and unilateral” exchange rate moves on the economy and would respond appropriately to excessive currency movements.
Asked about the effectiveness of verbal interventions at a conference on Tuesday, Suzuki said his comments on foreign exchange usually come in response to questions from reporters.
He said he was not in a position to comment on its effectiveness.
A weaker yen is a boon for Japanese exporters, but a headache for policymakers because it increases the cost of imports, adds to inflationary pressures and squeezes households.