Japan prepared to take necessary steps on forex moves: finance chief

Japan is prepared to take all necessary steps to counter excessive volatility in the currency market, Finance Minister Shunichi Suzuki said Tuesday, the latest in a series of verbal warnings as the yen continued to tumble, dropping past 154 against the U.S. dollar to a 34-year low.

Suzuki said the government is keeping close tabs on developments in the currency market but declined to say whether the yen’s recent fall was rapid and volatile, an assessment that could trigger another market intervention to slow its decline.

Japanese authorities have repeatedly warned that they would act if needed, keeping financial markets on edge over the possibility of another yen-buying, dollar-selling intervention.

The yen has already weakened past the level at which Japan previously intervened in October 2022, when it inched near the 152 level.

Still, Suzuki did not ratchet up his warnings on Tuesday and stuck to the same language in describing Japanese authorities’ concern. He did not use expressions like “decisive” action that would signal that a market intervention is imminent.

“We are closely watching market developments and we are prepared to take all necessary steps if needed,” Suzuki said at a press conference.

“With respect to whether the recent moves are excessive or rapid, I don’t think it’s appropriate to state our view because this is linked to our position to take all necessary steps.”

The dollar has strengthened as the U.S. Federal Reserve is no longer expected to start cutting interest rates as soon as June, following stronger-than-expected economic data.

Despite a recent rate hike by the Bank of Japan, the interest rate differential between Japan and the United States remains wide, making the yen less appealing.

Monday’s release of forecast-beating U.S. retail sales data sent the dollar above 154 yen, meaning it has gained about 3 yen in April. Heightened tensions in the Middle East have sent oil prices higher on supply concerns while boosting the dollar.

Japan’s top government spokesman Yoshimasa Hayashi also declined to comment directly on the possibility of market intervention.

“It’s important that foreign exchange moves are stable, reflecting fundamentals. Excessive fluctuations are not desirable,” said Hayashi, who serves as chief Cabinet secretary.

The dollar was trading in the lower 154 yen zone after the Japanese officials’ comments, within sight of the psychologically important 155 line.

A weak yen boosts Japanese exporters’ overseas profits in yen terms but inflates import costs for Japan, which relies heavily on foreign energy and other resources.

The dollar’s strength against the yen and other currencies comes as the finance chiefs of the Group of 20 major economies are scheduled to gather in Washington this week.

A strong dollar can trigger capital flight from emerging economies.

The G20 has taken the view that volatile and disorderly movements are not desirable because they negatively affect economic and financial stability.

Suzuki said he plans to explain Japan’s stance on currency policy if such opportunities arise, without elaborating.

The finance chiefs of the Group of Seven countries are also planning to meet in the U.S. capital on the fringes of gatherings hosted by the International Monetary Fund and World Bank.

The G20 includes the G7 members — Britain, Canada, France, Germany, Italy, Japan and the United States plus the European Union — along with Brazil, China, India and Russia among others.

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