Japan was ready to take all possible measures to counter excessively volatile currency fluctuations, Chief Cabinet Secretary Yoshimasa Hayashi declared, according to Reuters.
It is important for currency rates to move stably reflecting fundamentals. Excessive volatility is undesirable. We will closely watch exchange-rate developments and stand ready to take all possible measures.
The country is keeping markets on alert over the possibility of renewed intervention to support the yen. However, Hayashi declined to comment when asked if Tokyo had intervened in the currency market to support the yen for two consecutive days last week.
Traders suspect Tokyo intervened in the market to boost the currency, which has languished at 38-year lows, once on Thursday after a cooler-than-expected US inflation report caused the yen to surge, and again on Friday.
Bank of Japan data shows Japan might have spent as much as 3.57 trillion yen ($22.51 billion) on intervention on Thursday last week. Markets would await the release of money market data later on Tuesday to assess whether Tokyo intervened last Friday.
The yen jumped 3 per cent against the dollar to 157.40 after Thursday’s supposed intervention. However, it lost most of its ground on Tuesday to 158.62, not far from the 160 mark considered the Japanese authorities’ line-in-the-sand for currency intervention.
Some analysts see similarities between last week’s alleged intervention and the 1 May intervention, when soft comments from Federal Reserve Chair Jerome Powell put pressure on the dollar. In both cases, Tokyo probably intervened when the dollar was already weaker against the yen, Masafumi Yamamoto, chief currency strategist at Mizuho Securities, suggested.
This time, intervention came when the dollar/yen wasn’t necessarily rising sharply. This suggests authorities were worried more about the level of the yen, at below 160 (to the dollar), rather the speed of its falls.
While the weak yen provides a boost to exporters, it has become a source of concern for Japanese policymakers as it hurts consumption by inflating the cost of fuel and food imports. Japanese authorities have recently made it a rule not to confirm whether or not they have intervened in the currency market.
