Written by Makiko Yamazaki and Takaya Yamaguchi
TOKYO (Reuters) – Japan’s top currency diplomat on Monday issued a warning against speculative moves in the foreign exchange market as the yen fell below 149 yen to the dollar.
“We will monitor currency market movements, including speculative trading, with a sense of urgency,” Atsushi Mimura told reporters, reiterating a verbal warning tactic repeatedly used by his predecessor, Masato Kanda.
Mimura declined to comment on the details of the current market situation.
Separately, Katsunobu Kato, the country’s newly appointed finance minister, said the government will monitor how rapid currency movements affect the economy and will take action if necessary.
“The government will study what action to take while monitoring the effects,” Kato said in an interview with a small group of journalists on Monday.
The yen fell to 149.10 against the dollar in early trading on Monday, the weakest since August 16, after a surprisingly strong US jobs report for September led traders to cut their bets that the Federal Reserve will make further deep interest rate cuts.
The last time Japan intervened to buy the yen was in late July to support its currency after it fell to its lowest level in 38 years below 161 to the dollar.
The yen has also been under pressure since new Japanese Prime Minister Shigeru Ishiba surprised markets when he said the economy was not ready for further interest rate hikes, an apparent shift from its previous support for decades of easy monetary policy by the Bank of Japan.
In an interview on Monday, Kato said the government would leave specific policy steps to the Bank of Japan, when asked whether the interest rate should be maintained at 0.25%.
He added: “The government hopes that the Bank of Japan will communicate with the markets comprehensively and take the appropriate policy to achieve the inflation target of 2% in a stable and sustainable manner.”
The Bank of Japan in March made its first interest rate hike in 17 years, arguing that the pace of price and wage increases showed Japan was finally shaking its entrenched deflationary mentality. The central bank unexpectedly raised interest rates again in July, sending a jolt through local markets.