Japan’s top currency official warned that the government would take action if needed in comments that follow a weakening of the yen to its lowest levels since November last year.
“It’s important that currency markets reflect fundamentals and move in a stable manner. Excessive moves aren’t desirable,” Japanese Vice Finance Minister for International Affairs Masato Kanda told reporters after the first meeting of the Japanese Ministry of Finance, the Bank of Japan (BOJ) and the Financial Services Agency since March. “The government will continue to closely monitor market moves, and will take appropriate responses if necessary.”
The unscheduled meeting came after the yen softened beyond ¥140 per US dollar. Japan intervened in September and October last year to prop up the currency, after a slump that at one point took it past the 150 level.
Photo: Reuters
The meeting took place shortly after 5:30pm local time, and no statements were released.
“On our verbal intervention scale, this is just a two out of seven, with seven being warning of imminent intervention,” said David Forrester, Singapore-based strategist at Credit Agricole, ahead of the meeting. “So today’s meeting is likely to make sure mechanisms are still in place to intervene if needed.”
Markets are nowhere near the level of volatility used to justify intervention last year, he added.
The Japanese currency rallied about 0.5 percent from its intraday low of ¥140.93 per US dollar as news of the meeting broke. It traded at about ¥140.40 per US dollar as of 6:20pm in Tokyo following the meeting.
Representatives from the three key institutions last met on March 17 in response to jitters in the global banking sector following the failure of Silicon Valley Bank.
Some analysts have said the yen is close to hitting a bottom against the US dollar, with an improving trade account and higher tourism arrivals offering support, and is unlikely to weaken to levels requiring intervention. The Japanese currency has declined more than 6 percent this year.
“At this point, the government is unlikely to intervene, as stocks have maintained a strong bias amid the weaker yen,” Monex Inc bond and currency trader Tsutomu Soma said. “Investors may become more nervous should the yen fall to around 145.”
Kenneth Broux, head of corporate research for FX and rates at Societe Generale SA, said that FX intervention at current levels was unlikely.
“I think the barrier is higher for active dollar sales,” he said. “This is the start, trying to slow the speed” of yen weakness.
Jane Foley, head of FX strategy at Rabobank NV, also said the meeting was unlikely to bring about a change in policy, “but it may bring a change in temperature with regard to policy.”
She said the central bank’s July meeting was one to watch for the outlook for developments concerning the BOJ’s yield curve control policy.
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