By Leika Kihara and Makiko Yamazaki
TOKYO (Reuters) -Japan sees currency intervention as a possibility in dealing with excessively volatile and speculative moves in the yen, Finance Minister Satsuki Katayama said on Friday, in the strongest warning to date against recent falls in the currency.
“We are alarmed by recent one-sided, sharp moves in the currency market,” Katayama told a news conference, when asked about recent declines in the yen.
“It is important for currency rates to move stably, reflecting fundamentals. We will take appropriate action as needed against excess volatility and disorderly market moves, including those in the long term,” based on the U.S.-Japan agreement signed in September, he said.
In that agreement between Japan’s finance ministry and the U.S. Treasury Department, the two countries reaffirmed their commitment to “market determined” exchange rates, while agreeing that foreign exchange interventions should be reserved for combating excess volatility.
When asked whether Japan’s response could include currency intervention, Katayama said: “Yes, that’s written in the September statement, so it’s obviously so.”
The dollar fell 0.14% to 157.26 yen in Asia on Friday morning after Katayama’s remarks.
The remarks are an escalation from policymakers, who had been saying through Thursday that they were alarmed by one-sided, rapid moves in the yen and watching market developments with “a high sense of urgency”.
The weak yen has been a headache for Japanese policymakers because it pushes up import prices and household living costs.
The yen is down around 6% since Prime Minister Sanae Takaichi was elected leader of her party, in spite of rising Japanese yields, as markets are uneasy about the scale of borrowing needed to fund her stimulus plans.
Japan last intervened in the currency market in July 2024, when the yen fell to a 38-year low of around 161.96 to the dollar. Then, before directly stepping into the market, authorities warned of taking “decisive action”.
“Today’s comments suggest there is still some distance before direct intervention,” said Akira Moroga, chief market strategist at Aozora Bank.
“Having said that, authorities are probably preparing to act any time. There could be intervention once the dollar rises near 160 yen,” he said.
Hirofumi Suzuki, chief currency strategist at SMBC, also saw 160 yen per dollar as the line-in-the-sand for intervention.
“I think Japan’s monetary authorities would not hesitate too much when it comes to intervening in the foreign exchange market to curb excessive volatility,” Suzuki said.
(Reporting by Leika Kihara and Makiko Yamazaki; additional reporting by Rocky Swift and Noriyuki Hirata; Editing by Jamie Freed and Tom Hogue)
