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Japan won't rule out options to halt FX speculation, officials say

Published 09/05/2023, 08:39 PM
Updated 09/06/2023, 03:42 PM
© Reuters. A banknote of Japanese yen is seen in this illustration picture taken June 15, 2022. REUTERS/Florence Lo/Illustration

By Tetsushi Kajimoto

TOKYO (Reuters) -Japan's top currency diplomat Masato Kanda said on Wednesday that authorities won't rule out any option to clamp down on "speculative" currency moves, in a warning against a sell-off in the yen.

"Looking at underlying moves, speculative action or activity that cannot be explained by fundamentals can be observed," Kanda said.

Tokyo's top spokesperson Hirokazu Matsuno made similar comments later in the day, saying the government would take appropriate steps against excessive foreign exchange volatility without excluding any option.

Japanese authorities last intervened to support the yen in October last year, when they used phrases such as "deeply concerned" and pledged to take "decisive steps" in the run-up to intervention.

Wednesday's remarks were the strongest since August, when the Japanese currency slid past the key threshold of 145 per dollar. Since then, authorities have stopped firing warning shots, keeping traders guessing on Japan's intervention strategy.

"One-off intervention, or the so-called smoozing operations aimed at correcting short-term volatility are allowed according to international rules," said Satoshi Takase, market economist at Mizuho Securities.

"Market players are split, but 150 yen may be a psychological line that could trigger intervention."

Kanda, vice minister of finance for international affairs, was speaking to reporters after the dollar broke above 147 yen to edge closer to 148 yen overnight, this year's strongest level against the Japanese currency.

The dollar has gained momentum on the view the Federal Reserve may raise rates one more time to cope with persistent inflation, while the Bank of Japan is expected to continue powerful easing to stoke demand-pull inflation

"We won't rule out any options if speculative moves persist," Kanda told reporters. "Needless to say, it's important for currency moves to reflect fundamentals."

© Reuters. A banknote of Japanese yen is seen in this illustration picture taken June 15, 2022. REUTERS/Florence Lo/Illustration

Matsuno, Japan's chief cabinet secretary, said the government was monitoring the currency market "with a high sense of urgency" and excessive volatility could have a negative impact on the economy by raising uncertainties for companies.

Japanese core consumer price inflation, running above 3% for more than a year, has shown little sign of fuelling sustainable, wage-driven price rises.

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