By Makiko Yamazaki
TOKYO (Reuters) – Japan’s finance minister said on Tuesday authorities were alert to sharp moves in the currency market as the yen continued its slump to fresh 38-year lows against the dollar, but stopped short of giving a clear intervention warning.
The change in official daily commentary to reporters, in which an intervention warning has become almost common, comes as analysts doubt the effectiveness of such a slap in the face in halting sharp declines in the yen.
“Currency levels are determined by the market and reflect a complex mix of several factors, including inflation, current account balance, market sentiment and speculative movements,” Finance Minister Shunichi Suzuki said at a regular news conference after the Cabinet meeting.
“We continue to monitor the market closely,” he said.
Although Suzuki said there was no change in the government’s position, the lack of customary comments about willingness to intervene marked a break in what had become almost routine for officials.
Yujiro Goto, managing director and chief FX strategist at Nomura, said official comments on Tuesday indicated a slight change in tone.
“Repeating the same wording could inevitably weaken the impact (of warnings),” he said. No change in wording could be interpreted by investors to mean there would be no immediate action, he added.
“But I don’t think this (the lack of intervention warnings) indicates that interventions are now less likely than before,” he said.
The yen fell to 161.72 per dollar on Monday, its weakest level since 1986, leaving markets on high alert for signs of yen buying operations from Tokyo to support the currency.
This year, interest rates have already fallen by more than 12%, as they are still under pressure from the large interest rate differentials between the US and Japan.
Japanese authorities, including Suzuki and top currency diplomat Masato Kanda, further stepped up their warnings last week as the yen fell past 160 against the dollar, the last line sand traders had drawn for Japan to intervene in the markets.
Suzuki said last week that authorities were “deeply concerned” about the impact of “rapid and one-sided” currency movements on the economy and that they would respond appropriately to excessive currency movements.
Asked about the effectiveness of verbal interventions, Suzuki said at Tuesday’s conference that his comments on foreign exchange are usually in response to questions from reporters.
He said he is not in a position to comment on its effectiveness.
A weaker yen is a boon for Japan’s exporters but a headache for policymakers as it raises import costs, increases inflationary pressures and puts pressure on households.
