By Takaya Yamaguchi and Leika Kihara
TOKYO (Reuters) – Japanese authorities are ready to take action against speculative and excessively volatile moves in the currency market that are hurting the economy, the country’s top currency diplomat Masato Kanda said on Friday.
“It is not intended to change the trend of the market,” but was intended to smooth out excessive volatility in the foreign exchange market, Kanda told reporters when asked about exchange rate intervention.
“As long as currency rates move stably in line with fundamentals, there is no need to intervene. On the other hand, if there is speculative, excessive volatility in the market, we will take decisive action,” said Kanda, Deputy Minister of Finance for International Affairs. Affairs.
The comments failed to prevent the yen from falling below $159 for the first time since April 29, as markets continued to focus on the large interest rate differential between Japan and the United States. The dollar stood at 159.12 yen in Asia on Friday.
Cabinet Secretary Yoshimasa Hayashi also warned yen bears against pushing the currency lower, saying authorities would continue to monitor movements in the foreign exchange market.
“It is important that exchange rates move in a way that reflects fundamentals,” he said at a news conference.
Japan spent 9.8 trillion yen ($61.6 billion) on currency market interventions in April and May, after the Japanese currency hit a 34-year low of 160.245 per dollar on April 29.
While these moves have kept the yen from hitting new lows, they have failed to reverse the currency’s downward trend, which is hurting households by driving up import costs for fuel and food.
As markets monitor the likelihood of renewed intervention, a U.S. Treasury Department report issued Thursday added Japan to its currency monitoring list, joining six countries that were on the previous list.
Finance Minister Shunichi Suzuki said Friday he did not believe Washington had any problem with Japan’s currency policy.
“We will communicate closely with the authorities of the US and other countries, based on the G7 agreement that excessive, disorderly currency movements could have negative consequences for economies,” Suzuki told a regular news conference.
While the U.S. Treasury Department said Tokyo’s recent currency intervention was not a factor in the decision to add Japan to the monitoring list, it said intervention should only be reserved for very exceptional circumstances in major, freely traded currency markets.
($1 = 158.9900 yen)