Lake Kihara
STRESA, Italy (Reuters) – Japan is ready to take appropriate market action “at any time” to counter excessive fluctuations in the yen, its chief currency diplomat Masato Kanda said on Friday, issuing a new warning about the possibility of a resumption of exchange. tariff intervention.
Kanda also said he communicates frequently and closely with foreign counterparts, especially in the United States, on issues including financial markets.
“Under a flexible exchange rate regime, we will not need to intervene if the currency movement is stable. But if there are excessively volatile movements that have a negative impact on the economy, we need to take action and it will be worth it. “Kanda told reporters.
“We are ready to act whenever necessary against currency movements,” he said after accompanying Japanese Finance Minister Shunichi Suzuki on the first day of a meeting of G7 financial leaders in the northern Italian city of Stresa.
Kanda made his remarks a day after US Treasury Secretary Janet Yellen said currency interventions should be used only rarely and in a well-informed manner.
At the G7 meeting, Japan told its counterparts to be vigilant against excessive volatility in the foreign exchange market caused by speculative activities, Kanda said.
Japan also said at the meeting that it was important to “respond appropriately” to excessive, erratic movements in the foreign exchange market that could harm the economy, he added.
Japan will push for language from G7 financial leaders to include language reaffirming the group’s position that excessive and volatile exchange rate movements are undesirable, he said.
Kanda, who oversees Japan’s monetary policy as deputy finance minister for international affairs, declined to comment when asked about the yen’s recent fall.
The yen has lost 11% against the dollar this year on expectations that the U.S. Federal Reserve will be slow to cut interest rates, keeping the divergence wide between U.S. rates and Japan’s ultra-low rates.
SUSPECT INTERVENTION
The weak yen has become a headache for Japanese policymakers as it hurts consumption by inflating the cost of importing raw materials.
Japan is believed to have intervened in the currency market to support the yen on April 29 and May 2 to stem what authorities called excessive speculative movements in the currency.
Although the proposed intervention kept the yen from falling below the psychologically important 160 line against the dollar, the Japanese currency has yet to show a clear recovery. It stood at 156.98 per dollar on Friday, not far from a more than three-week low of 157.19 hit on Thursday.
Markets view the 160 per dollar level as a line in the sand for the authorities, which increases the likelihood of intervention to buy the yen. Tokyo entered the market when the Japanese currency fell below this level.
The G7 group of developed countries shares a common understanding that stable currency movements are desirable and that countries have the right to take market action when exchange rate movements become too volatile.
Tokyo says the G7 agreement gives it the freedom to intervene in the foreign exchange market to counter excessive movements in the yen.