Japan warns against speculative yen moves, markets wary of further intervention

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TOKYO – Japan’s Finance Minister Shunichi Suzuki said authorities were ready to respond to speculative currency moves, a fresh warning that comes days after Tokyo intervened in the foreign exchange market to stem the yen’s fall for the first time in over two decades.

Suzuki told a news conference Monday that the government and the Bank of Japan (BOJ) are on the same page when it comes to the currency’s sharp drop.

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“We are deeply concerned by the recent rapid and lopsided market moves, caused in part by speculative trading,” Suzuki said at a news conference. “There is no change in our stance of being ready to respond when needed,” he added.

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The remark came after the government’s decision on Thursday to intervene in the foreign exchange market to stem yen weakness, selling dollars and buying yen for the first time since 1998.

The yen’s recent sharp decline, which has pushed household living costs higher with rising imported fuel and food prices, was caused in part by growing divergence between the US Federal Reserve’s aggressive monetary tightening and the BOJ’s ultra-loose monetary policy.

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BOJ Governor Haruhiko Kuroda is expected to address business leaders in Osaka, western Japan, later Monday Monday, in which he may comment on the yen and the government’s intervention.

The dollar rose 0.29% to 143.78 yen on Monday, continuing its climb back towards Thursday’s 24-year high of 145.90. It fell to 140.31 on the same day after Japanese authorities entered the market.

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While government officials’ jawbones might make markets nervous at the prospect of further intervention, it might be difficult to repeatedly enter the FX market and sell huge sums of dollars as Japan may face criticism from its G7 counterparts.

“It is unlikely that Japan will continue to intervene to defend a particular line, such as 145 yen to the dollar,” former top Japanese currency diplomat Naoyuki Shinohara told Reuters.

The yen is not alone in its downward spiral. Several other currencies, including the British pound, the euro and the Chinese yuan, have been hurt in part by the US Federal Reserve’s aggressive rate hikes in recent months. (Reporting by Tetsushi Kajimoto; Writing by Leika Kihara; Editing by Sam Holmes & Shri Navaratnam)

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