Japan concerned about ‘rapid, one-sided’ moves in FX market

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TOKYO, Sept 7 (Reuters) – Japan’s government wants to act if recent “rapid and one-sided” moves seen in the currency market continue, the country’s top government spokesman warned on Wednesday as the yen fell to a new low of 24 years.

The comments marked the latest verbal warning from officials against a slide in the yen, which has weakened beyond 144 yen per dollar after falling 1.5% on Tuesday.

“I am concerned about the rapid and one-sided moves in the forex market recently,” chief cabinet secretary Hirokazu Matsuno told reporters at a news conference, using stronger language about the yen’s decline than comments from officials earlier this week.

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The government “would like to take the necessary measures if such movements continue,” he said, adding that sharp fluctuations are not desirable. He made the comments before the yen hit a new low.

Such official comments, called gawps in the forex markets, are intended to warn traders by hinting that the authorities may intervene.

Asked later on Wednesday whether a government response may include foreign exchange intervention, Finance Minister Shunichi Suzuki declined to comment and remained silent on what any possible response would look like.

Meanwhile, former chief currency diplomat Hiroshi Watanabe told Reuters the government did not need to intervene to stop the yen’s declines as such a move would be ineffective in offsetting the dollar’s broad gains. read more

The Japanese currency, which fell as low as 144.38 per dollar on Wednesday, has lost about 20% since the beginning of the year, driven lower mainly by the divergence in monetary policy between Japan and the United States.

“Dollar/yen seems to be topping a bit now and could touch 145 briefly at the end of this month. But such a move probably won’t last long,” Watanabe said, adding that the government didn’t need to respond even if the dollar briefly hit 145 yen. .

The government “also doesn’t need to trade (to smooth out market volatility) as exchange rate movements are driven by broad dollar gains,” it added.

POLICY DIVERGENCE

The main reason for the yen’s decline from around 115 per dollar since the beginning of the year has been a widening gap between US interest rates and the ultra-low levels maintained by the Bank of Japan (BOJ).

The Japanese central bank has pledged to stick to its powerful monetary stimulus and is expected to do so. Former BOJ board member Goushi Kataoka told Reuters he was unlikely to change his stance even as inflation is forecast to reach 3% in the coming months, well above the BOJ’s target of 2 %. read more

The Federal Reserve, on the other hand, is expected to continue raising interest rates for the time being.

“As long as the BOJ maintains its current policy, it will be very difficult for the Japanese side to change course,” said Bart Wakabayashi, co-branch manager at State Street Bank.

Japan last intervened by selling dollars and buying yen in the foreign exchange market in June 1998, when the yen fell by more than 146 per dollar.

“Intervention has often proven to be a temporary break, and not so much to change the mindset of the market,” Wakabayashi added.

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Reporting by Kantaro Komiya, Tetsushi Kajimoto, and Daniel Leussink; Written by Daniel Leussink; Edited by Chang-Ran Kim and Bradley Perrett

Our standards: The Thomson Reuters Trust Principles.

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