The Japanese government and central bank are considering measures, including unilateral intervention in the currency market, to counter any abrupt gains in the yen, the Nikkei newspaper reported.
Intervention might take place if yen demand jumps abruptly following UK’s vote to leave the EU, and there is enough pressure on the economy and inflation, the newspaper reported yesterday.
The report cited an unnamed Japanese Ministry of Finance official as saying that action is possible even without US approval in a “fight” to protect “national interests.”
Calls to the ministry and the Bank of Japan outside business hours were not answered.
Japanese authorities voiced growing concern at the yen’s surge past ￥100 per US dollar for the first time since November 2013, as the UK voted to leave the EU on Friday.
While Japanese Minister of Finance Taro Aso said he is ready to act in markets if needed, he declined to comment on potential unilateral intervention or coordinated action with G7 counterparts.
G7 finance chiefs said after a conference call on Friday they would “continue to consult closely on market movements and financial stability, and cooperate as appropriate.”
Officials recognized that “excessive volatility and disorderly movements in exchange rates” can harm economic and financial stability and pledged to use “established liquidity instruments” to support the functioning of markets.
The yen strengthened as much as 7.2 percent to ￥99.02 per US dollar on Friday, and climbed against all 16 of its major peers, before closing at ￥102.22.
After four consecutive years of declines, the yen has advanced almost 18 percent this year against the US dollar in the best performance among developed nations, amid concerns a Brexit would drag down already-tepid global growth.
Other than the Bank of Japan, the world’s major central banks rushed on Friday to deal with financial markets chaos over Brexit, with the Bank of England swiftly announcing that it was ready to pump ￡250 billion (US$342 billion) to aid the smooth running of markets and the European Central Bank, saying that it was on stand-by to open the liquidity floodgates if needed.
The US Federal Reserve said it was prepared to provide US dollar liquidity through its existing swap lines with central banks, while Switzerland’s central bank said that it had “intervened” in the foreign exchange market to stabilize the Swiss franc, considered a safe haven currency.
Leaders of major central banks are to have the chance to discuss how to handle volatility surrounding Brexit at a three-day conference hosted by the European Central Bank that opens in Sintra, Portugal, tomorrow.
European Central Bank President Mario Draghi, US Federal Reserve Chair Janet Yellen and Bank of England Governor Mark Carney are to be at conference.
Additional reporting by AFP
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