Japan won’t weaken the yen to become more competitive with other countries in trade and any currency intervention would be aimed at restraining excessive moves, Japanese Vice Finance Minister Fumihiko Igarashi said.
“It’s not our intention to engage in a currency-devaluation race for the sake of the national interest,” Igarashi said in an interview in Tokyo yesterday. “We could conduct smoothing operations when movements are extremely volatile, that would be permissible.”
Igarashi spoke after Japan’s currency reached its highest level against the US dollar since 1995, surpassing the level at which the nation’s authorities last month intervened for the first time since 2004. Finance chiefs from the G7 major industrialized nations are poised to discuss exchange rates at a meeting in Washington today.
Currency wars between major countries could derail the global economy’s recovery, Olivier Blanchard, the IMF’s chief economist, told Bloomberg Television in an interview yesterday.
Japan’s currency, which has risen 12 percent this year, rose to a fresh 15-year high at ¥82.62 against the US dollar in Tokyo trading hours yesterday amid expectations of additional monetary easing by the US Federal Reserve, dealers said.
That would drive down interest rates and dampen the dollar’s appeal to investors.
Concerned about the yen and persistent deflation, Japan’s central bank returned to a virtually zero rate policy this week and announced plans to set up a ¥5 trillion (US$60.34 billion) asset-buying fund that aims to lower long-term interest rates. Japan sold more than ¥2 trillion in its intervention on Sept. 15.
The Japanese Ministry of Finance also said yesterday that Japan’s foreign exchange reserves hit an all-time high last month after the central bank intervened in currency markets.
Japan’s international reserves rose for the fourth straight month to US$1.11 trillion as of Sept. 30, up US$39.45 billion from a month earlier. The previous record of US$1.07 trillion was recorded in November last year. Igarashi, who was appointed to his post last month, is a ruling Democratic Party of Japan politician who once cited traders as saying Japan’s intervention efforts were “foolish.” The 61-year-old lawmaker started out as a political reporter at Jiji Press.
Japanese Finance Minister Yoshihiko Noda said he would explain last month’s action to his counterparts at the gathering of G7 finance ministers and central bankers after the sales were criticized by European officials and US lawmakers. Noda declined to comment on the currency’s advance in Tokyo yesterday.
Japan’s sales came after countries from China to Brazil and South Korea pursued steps to limit gains in their currencies.
Canadian Finance Minister Jim Flaherty said on Wednesday that “there are concerns about interventions in currency markets” and that he’s “sure” the issue would be discussed in Washington.
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