THE STAR/ANN – Japan’s government and central bank say they are concerned by recent sharp falls in the yen in a rare joint statement, the strongest warning to date that Tokyo could intervene to support the currency which has sunk to 20-year lows.
After a meeting with his Bank of Japan (BoJ) counterpart, top currency diplomat Masato Kanda told reporters that Tokyo will “respond flexibly with all options on the table”.
He declined to say whether Tokyo could negotiate with other countries to jointly step into the market.
The Group of Seven, of which Japan is a member, has a long standing policy that markets ought to determine currency rates, but that the group will coordinate on currency moves, and that excessive and disorderly exchange-rate moves could hurt growth.
“We have seen sharp yen declines and are concerned about recent currency market moves,” the Finance Ministry, BoJ and the Financial Services Agency said in the joint statement released after their executives’ meeting.
Officials of the three institutions meet occasionally, usually to signal to markets their alarm over sharp market moves. But it is rare for them to issue a joint statement with explicit warnings over currency moves.
The US dollar fell 0.70 per cent to JPY133.41 after the statement.
“Tokyo could intervene if the yen slides below JPY135 to the dollar and starts going into a free fall.
“That’s when Tokyo really needs to step in,” said Chief Economist at Itochu Economic Research Institute in Tokyo Atsushi Takeda.
“But Washington won’t join… For the United States, there’s really no merit in joining Tokyo on intervention.”
Unlike other major central banks which are flagging aggressive interest rate hikes to tackle inflation, the BoJ has repeatedly committed to keeping rates low, making Japanese assets less attractive for investors.
