Takaya Yamaguchi and Leika Kihara
TOKYO (Reuters) – Japanese authorities are ready to take action against speculative and excessively volatile movements in the foreign exchange market that are damaging the economy, the country’s top currency diplomat Masato Kanda said on Friday.
“This is not intended to change the market trend” but aims to smooth out excessive volatility in the foreign exchange market, Kanda told reporters when asked about the exchange rate interventions.
“As long as exchange rates move steadily in line with fundamentals, there is no need to intervene. On the contrary, if there is speculative, excessive volatility in the market, we will take decisive action,” said Kanda, Treasury Undersecretary for International Affairs. affairs.
The remarks failed to keep the yen from falling below 159 per dollar for the first time since April 29 as markets continued to focus on the wide interest rate divergence between Japan and the United States. On Friday, the dollar was at 159.12 yen in Asia.
Chief Cabinet Secretary Yoshimasa Hayashi also warned yen bears against pressure on the currency, saying authorities would continue to monitor movements in the currency market.
“It is important that exchange rates move in a way that reflects fundamentals,” he told a news conference.
Japan spent 9.8 trillion yen ($61.6 billion) on foreign exchange market interventions in April and May after the Japanese currency hit a 34-year low of 160.245 to the dollar on April 29.
While the moves prevented the yen from testing new lows, they failed to reverse the currency’s downward trend, which is hurting households by increasing import costs for fuel and food.
As markets monitor the possibility of renewed intervention, a US Treasury report released on Thursday added Japan to the currency monitoring list along with six countries that were on the previous list.
Finance Minister Shunichi Suzuki said Friday he doesn’t believe Washington has any problem with Japan’s monetary policy.
“We will work closely with the authorities of the United States and other countries based on the G7 agreement that excessive and erratic currency movements can have negative consequences for the economy,” Suzuki said at a regular news conference.
While the U.S. Treasury said Tokyo’s recent currency intervention was not a factor in the decision to place Japan on the monitoring list, it said intervention should be reserved only for very exceptional circumstances in large, freely traded currency markets.
($1 = 158.9900 yen)