Japan maintains warnings against sharp yen falls

Government offers no comment on whether it intervened last week. Analysts see similarities to suspected May 1 yen intervention

By Reuters

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An electronic board displays the Nikkei average closing price at 41,190.68 down 1,033 yen, the biggest drop this year, on the Tokyo Stock Exchange in Tokyo on July 12, 2024. — AFP

Published: Tue 16 Jul 2024, 10:07 AM

Japan stands ready to take all possible measures to counter excessively volatile currency moves, Chief Cabinet Secretary Yoshimasa Hayashi said on Tuesday, keeping markets on alert over the chance of renewed intervention to prop up the yen.

"It is important for currency rates to move stably reflecting fundamentals. Excessive volatility is undesirable," Hayashi told a regular news conference.

"We will closely watch exchange-rate developments and stand ready to take all possible measures," he said.

Hayashi declined to comment when asked whether Tokyo intervened in the currency market to prop up the yen for two straight days last week.

Traders suspect Tokyo intervened in the market to lift a currency that has languished at 38-year lows, once on Thursday after cooler-than-expected U.S. inflation report triggered a jump in the yen, and again on Friday.

Bank of Japan data suggested Japan may have spent up to 3.57 trillion yen ($22.51 billion) intervening on Thursday last week. Markets will be eyeing the release of money market data later on Tuesday, to gauge if Tokyo stepped in last Friday as well.

The yen jumped 3% against the dollar to 157.40 after Thursday's suspected intervention.

But it lost most of its ground and stood at 158.62 on Tuesday, not far off the 160 mark seen as Japanese authorities' line-in-the-sand for currency intervention.

Some analysts see similarities between last week's suspected intervention and that on May 1, when dovish comments from Federal Reserve Chair Jerome Powell weighed on the dollar.

In both cases, Tokyo likely intervened when the dollar was already on the back foot against the yen, said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

"This time, intervention came when the dollar/yen wasn't necessarily rising sharply," he said. "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 a weak yen gives exporters a boost, it has become a source of concern for Japanese policymakers as hurts consumption by inflating the cost of fuel and food imports.

Japanese authorities have recently made it standard practice to not confirm whether they have intervened in the currency market or not.