TOKYO – Japan is prepared to respond on all fronts to speculative moves in the foreign exchange market, the nation’s top currency official signalled, after authorities were suspected of having conducted intervention over the holiday period.
“We’re targeting all angles” when it comes to intervention, Atsushi Mimura, vice finance minister for international affairs, told reporters on May 7 when asked whether recent yen moves were driven by crude oil futures. He added that authorities are monitoring markets with a sense of urgency amid continuing speculative moves.
Mr Mimura said there’s no need for him to comment on the yen’s sharp move on May 6, when it surged about 1.8 per cent in roughly 30 minutes to as high as 155.04 per US dollar, the strongest level in 10 weeks, before paring gains. At 11.35am in Tokyo on May 7, the yen was little changed at 156.22.
Mr Mimura also declined to comment on whether the Finance Ministry had an exchange rate level it was defending. Typically, currency officials say they will take action against sharp movements or excess volatility in the market rather than defend a particular level.
Japan desires a stronger yen primarily to curb high imported inflation – worsened by the spike in oil prices from to the Iran war.
Since reported intervention on April 30, the yen has seen multiple sharp gains during Japan’s Golden Week holiday period that concluded on May 6. Speculation that those moves were triggered by more rounds of intervention raised questions over how often Tokyo authorities can enter the market while still maintaining Japan’s status as a nation with a freely floating exchange rate under International Monetary Fund guidelines.
Those guidelines suggest Japan can conduct only two more three-day intervention bursts through November if it wants to retain that status.
Mr Mimura said the rules don’t limit how often Japan can enter the market.
With the holiday period having run its course, authorities may find it harder to influence market levels as liquidity returns.
“With the holiday period ending, the weekend will come again,” Mr Mimura said, in an apparent effort to keep investors on edge. BLOOMBERG
