Japan warns against excessive yen moves, repeats verbal intervention By Reuters

By Leika Kihara and Yukiko Toyoda

TOKYO (Reuters) -Japanese Prime Minister Fumio Kishida said on Friday authorities will use “all available means” to deal with excessive yen falls, stressing Tokyo’s readiness to intervene in the market to prop up the currency.

“It’s important for currency rates to move stably reflecting fundamentals. Excessive volatility is undesirable,” Kishida told a group interview, echoing remarks made earlier by Finance Minister Shunichi Suzuki.

The remarks add to a barrage of jawboning by Japanese policymakers and underscore Tokyo’s strong alarm over the yen’s recent declines, which give exports a boost but hurt households and retailers by inflating the cost of imports.

The yen strengthened to a two-week high of 150.81 against the dollar on Friday, off the 34-year low of 151.975 hit last week, as repeated warnings by authorities keep investors on guard against the chance of yen-buying intervention.

The yen fell to a 34-year low of 151.975 versus the dollar last week despite the Bank of Japan’s historic policy shift that ended eight years of negative interest rates, as markets interpreted its dovish guidance as a sign further rate hikes will be some time away.

Shortly after the yen hit the 34-year low on Wednesday last week, Suzuki said authorities were ready to take “decisive steps” against speculative yen moves in the strongest warning to date that currency intervention could be imminent.

He has held off on using such language since then, but continued to warn that authorities won’t rule out any options to deal with excessive yen declines.

Markets are also on the look-out for any clues from BOJ Governor Kazuo Ueda on how soon the central bank could next raise interest rates.

In an interview with Asahi newspaper, Ueda said inflation would likely accelerate “from summer towards autumn” as this year’s bumper pay hikes push up prices, signalling the chance of another interest rate hike later this year.

Ueda also said the BOJ could “respond with monetary policy” if yen declines significantly affect inflation and wages, suggesting that yen moves were among factors that could trigger an interest rate hike.

“Exchange-rate moves are among important factors that affect the economy and prices,” Ueda said in parliament on Friday.

“We will continue to scrutinise currency market developments and their impact on the economy and prices, while working closely with the government,” he said.

Expectations that the interest rate gap between the United States and Japan will remain wide have continued to drive yen selling.