By Makiko Yamazaki and Kevin Buckland
TOKYO (Reuters) -Japan stands ready 24 hours a day to deal with currency issues, top currency diplomat Masato Kanda said on Tuesday, as money market data suggested the Finance Ministry had spent about $35 billion a day earlier to support the sliding yen.
Kanda would not say whether authorities were behind the currency’s rise on Monday, but traders and a former Japanese official said it had all the signs of an intervention.
“We are ready 24 hours a day, so whether it is London, New York or Wellington, it makes no difference,” the Deputy Finance Minister for International Affairs told reporters.
The central bank’s money market projections released late Tuesday showed it expected a strong rise in yen income on Wednesday, which could point to heavy yen buying on Monday as currency transactions typically take two days.
The data shows that spending may have been close to the daily record of 5.62 trillion yen – almost $36 billion at current exchange rates – when Japan intervened in October 2022. If it has done so again, it also signals that it is ready to address the currency’s weakness after weeks of rhetoric.
Factors other than currency intervention can affect money market balances.
Earlier on Tuesday, Prime Minister Fumio Kishida also declined to be drawn into discussing currency movements or interventions.
The yen last traded at 157.03 against the dollar in New York trading after falling to 160.245 on Monday, marking another 34-year low.
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Although Kanda avoided direct questions about intervention, he said authorities would act if excessive measures caused by speculators negatively affected people’s daily lives.
“Higher prices of imports would hit the most vulnerable people and could slow Japan’s momentum to raise real wages,” he said.
“The government should respond to such steps.”
IN ALL PROBABILITY
The yen has been falling for years as global interest rates have risen in response to resurgent inflation, while Japan’s has remained near zero.
That gap has driven money out of the yen into other, better-yielding currencies, and even in March, when Japan raised rates for the first time since 2007, the yen fell.
Momentum and waning expectations of rate cuts in the United States have also helped push down the yen, which has lost more than a third of its value against the dollar since the start of 2021 and pushed Japan into the market to defend its currency in 2022.
Former top currency diplomat Mitsuhiro Furusawa told Reuters it was very likely Japan had taken action again this week.
Krishna Srinivasan, director of the IMF’s Asia and Pacific department, said the lender sees the Japanese authorities’ full commitment to a flexible exchange rate regime and is in close discussions with them.
While the yen’s recent weakness largely reflects interest rate differentials, other factors are playing an increasingly important role in these developments, including large carry trade positions, he said in Singapore. He declined to comment specifically on the yen’s movements in recent days.
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In carry trades, investors borrow a low-interest currency, such as the yen, and sell it to buy higher-interest currencies.
Group of Seven financial leaders this month agreed to a Japanese proposal to reaffirm that excessive volatility and disorderly movements in the currency market were undesirable.
In the first trilateral financial dialogue since the three-way leaders’ summit at Camp David last year, the US, Japan and South Korea agreed to consult on currency markets, acknowledging concerns in Tokyo and Seoul over their collapsing currencies.
It was widely believed that the meetings cleared Tokyo to enter the foreign exchange market.
($1 = 156.9100 yen)
