Japan’s government wants to act if “rapid, one-sided” moves seen in the currency market recently continue, the country’s top government spokesperson warned on Wednesday as the yen slid to a fresh 24-year low.
The comments marked officials’ latest verbal warning against the fall of the yen, which weakened beyond 144 yen per dollar after slumping about 1.5% on Tuesday.
“I’m concerned about rapid, one-sided moves in the currency market recently,” Chief Cabinet Secretary Hirokazu Matsuno told reporters at a news briefing, using stronger language about the yen’s fall than officials’ remarks earlier this week.
The government “would like to take necessary steps if such movements continue,” he said, adding that sharp fluctuations were not desirable. He made the comments before the yen hit a fresh low.
Such official remarks, called jawboning in foreign exchange markets, are intended to make traders cautious by implying the authorities may intervene.
When asked later on Wednesday whether a government response may include foreign exchange market intervention, Finance Minister Shunichi Suzuki declined to comment, keeping mum on what any possible response may look like.
Former top currency diplomat Hiroshi Watanabe, meanwhile, told Reuters the government did not need to intervene to stem yen falls, as such a move would be ineffective in countering broad dollar gains.
The Japanese currency, which dropped as low as 144.38 per dollar on Wednesday, has lost about 20% since the start of the year, driven lower mainly by divergence in monetary policy between Japan and the United States.
“The dollar/yen seems to be overshooting somewhat now and could briefly touch 145 later this month. But such a move likely won’t last long,” Watanabe said, adding the government did not need to respond even if the dollar did briefly reach 145 yen.
The government “also doesn’t need to conduct operations (to smooth market volatility) as exchange-rate moves are driven by broad dollar gains,” he added.
POLICY DIVERGENCE
The main reason for the yen’s fall from around 115 per dollar since the start of the year has been a growing gap between U.S. interest rates and the ultra-low levels maintained by the Bank of Japan (BOJ).
The Japanese central bank has vowed to stick to its powerful monetary stimulus and is widely expected to do so. Ex-BOJ board member Goushi Kataoka told Reuters it was unlikely to shift its stance even as inflation is seen reaching 3% in coming months, well above the BOJ target of 2%.
The Federal Reserve, on the other hand, is expected to continue raising interest rates for the time being.
“As long as the BOJ maintains its current policy, it’ll be very hard for the Japanese side to turn this tide,” said Bart Wakabayashi, co-branch manager for State Street (NYSE:STT) Bank.
Japan last intervened by selling the dollar and buying the yen in the foreign exchange market in June 1998 when the yen fell beyond 146 per dollar.
“Intervention has often proved to be a temporary break, and not so much to change the market mindset,” Wakabayashi added.
