Written by Makiko Yamazaki and Yoshifumi Takemoto
TOKYO (Reuters) – Japan is always ready to take action against excessive market moves, Tokyo’s chief currency diplomat Masato Kanda said on Monday, as the yen fell to nearly 160 yen to the dollar, sparking market caution about the possibility of new intervention.
“We will not comment on the daily movements of the currency because such comments can give the market unexpected effects, but we are always ready to take appropriate action when there are excessive movements,” Kanda told reporters.
Japanese Finance Minister Shunichi Suzuki reiterated Kanda’s warning against excessive moves, saying Tokyo “wishes to respond appropriately as needed.”
Suzuki declined to comment on whether he considered the current market movements excessive, but stressed that it was desirable for currency movements to be stable and reflect fundamentals.
The yen came under pressure after the Bank of Japan’s decision this month to postpone reducing bond-buying incentives until its meeting in July. The dollar was trading at 159.87 yen early Monday.
Kanda, deputy finance minister for international affairs, said he was aware that the yen’s devaluation of about 160 yen to the dollar had increased market caution about intervention, but noted that authorities had no specific levels in mind for when to intervene.
The market widely sees 160 yen to the dollar as the authorities’ line in the sand. Japan spent about 9.8 trillion yen ($61.64 billion) to remove the currency from its lowest level in 34 years of 160.245 to the dollar, which it recorded on April 29.
However, these steps have failed to reverse the yen’s weakness due in part to wide interest rate differentials between Japan and the United States.
Kanda also said that Japan’s addition to the U.S. Treasury Department’s foreign exchange manipulation watch list has “absolutely no impact” on Tokyo’s policy choices.
A US Treasury report released on Thursday added Japan to the foreign exchange watch list along with six countries that were on the previous list.
“Japan has the political freedom to ensure foreign exchange rates move in a stable manner that reflects fundamentals,” Kanda said.
He added that problems arise with currency intervention when a country tries to weaken its currency to boost exports, but “what we are doing is exactly the opposite.”
“We will respond firmly to moves that are too rapid or driven by speculators,” he said. “If no action is taken on such moves, people, businesses and families will suffer.”
