Japan reiterates yen warnings as market awaits intervention

  • Yen hits 32-year low above 149 to the dollar despite warnings
  • Finmin says it does not tolerate excessive and speculative movements in the yen
  • No comment on whether Japan is conducting a ‘stealth intervention’
  • Kuroda says few expect prolonged dollar strength

TOKYO, Oct 18 (Reuters) – Finance Minister Shunichi Suzuki warned on Tuesday that Japan would take appropriate and decisive action against speculator-induced excessive currency movements, raising the possibility of increased market intervention after the yen hit a fresh 32-year low. .

Suzuki also reiterated that authorities could intervene without any announcement, but did not say whether they had actually done so, when pressed to speculate that Japan might support the yen without publicly acknowledging it.

“We are watching market movements closely with a high sense of urgency. We will respond appropriately decisively to excessive movements,” Suzuki told a parliamentary session on Tuesday.

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Pressed by an opposition MP on what a decisive response would mean, he added: “We intervened in the foreign exchange market as a decisive measure (September 22₎).”

Suzuki, speaking to reporters earlier on Tuesday, declined to comment on whether authorities were making a stealthy intervention to support the weakening yen.

“Generally speaking, there are times when we step in with announcements and other times when we don’t,” he said, reiterating comments made last week after executive meetings. financiers in Washington. He did not comment further on the matter.

The yen slipped to 149.10 to the dollar ahead of the start of Asian trading on Tuesday, its weakest since August 1990, highlighting the main psychological barrier of 150.

Policymakers, who once viewed the strength of the yen as a cause for concern for the trade-driven economy, now fear that the sharp drop in the yen will increase already high import costs for commodities, squeeze households and upset business plans.

Authorities have issued verbal warnings against the decline of the yen almost daily since early September, when it hit 144 to the dollar as rate hikes by the Federal Reserve boosted the U.S. currency.

Suzuki first acknowledged that the weak yen was negative for the economy in April, when it traded around 126 to the dollar. It continued to fall sharply and is down about 20% since the start of the year.

Japan spent 2.8 trillion yen ($18.81 billion) on intervention selling dollars and buying yen last month as authorities acted in markets to support the yen for the first time since 1998 .

Bank of Japan estimates released last Friday showed that excess reserves parked by central bank institutions were likely to have fallen by 4.09 trillion yen as of Monday, October 17, in part due to actions that may be related to monetary intervention.

The BOJ’s previous estimate, released on September 30, indicated a drop of 2.9 trillion yen at the start of October.

The discrepancy of more than 1 trillion yen could reflect funds being absorbed from excess reserves following an intervention to buy yen and sell dollars. This fueled speculation among market participants that the government and central bank may have intervened in the market without announcing it.

During Tuesday’s parliamentary session, Prime Minister Fumio Kishida joined in warning that rapid and speculative currency movements were problematic.

Kishida dismissed the prevailing market view that the Bank of Japan’s ultra-accommodative monetary policy was largely behind the sharp declines in the yen, saying exchange rates move based on a variety of factors, and not just interest rate differentials between the United States and Japan.

“The Bank of Japan decides monetary policy based not only on currency movements, but on global factors, such as the evolution of the economy and prices as well as the impact on small and medium-sized businesses,” he said. Kishida said.

Kuroda, who was also appearing in parliament after attending last week’s meetings of world financial leaders, suggested dollar strength may not persist.

“The dollar has become very strong against all currencies in the world,” Kuroda said. “But few people I met in Washington thought it would last long.”

($1 = 148.8400 yen)

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Reporting by Tetsushi Kajimoto; Additional reporting by Daniel Leussink; Editing by Kim Coghill, Sam Holmes and Edmund Klamann

Our standards: The Thomson Reuters Trust Principles.

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