(Bloomberg) — The yen remained under pressure and within a fraction of key levels against the dollar on Monday, even as Japan’s top official warned that authorities are prepared to intervene in currency markets around the clock if necessary .
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“If there are excessive currency fluctuations, it will have a negative impact on the national economy,” said Deputy Finance Minister Masato Kanda. “In the event of excessive measures based on speculation, we are prepared to take appropriate action.”
Kanda spoke as the yen hovered around the psychological level of 160 against the dollar and the weak point of 160.17 came on April 29, when Japan is thought to have entered the market. The yen was little changed at 159.81 at 9:59 a.m. in Tokyo, leaving it near its weakest level in about 34 years.
Japan has acknowledged spending ¥9.8 trillion ($61.3 billion) on foreign exchange market interventions over a one-month period between April 26 and May 29. Authorities did not specify dates for the Bank of Japan’s government-ordered action, but trading patterns indicate two major rounds of intervention took place on April 29 and May 1. Foreign reserves data indicate that Japan likely sold government bonds to help finance that move.
“We suspect the next round of BOJ intervention is likely to occur after USD/JPY triggers buy orders above the late April high of 160.20ish,” wrote Tony Sycamore, market analyst at IG Australia. He said the yen’s decline against the dollar last week was driven by stronger-than-expected U.S. purchasing managers’ index data and the BOJ’s reluctance to come up with a detailed plan on reducing bond purchases.
The BOJ could make even steeper cuts in bond purchases after consulting the views of market participants, a member of the policy board said at this month’s meeting, according to a summary of the advice issued Monday. One member said the BOJ should consider further adjustment in monetary easing as there are upside risks to inflation.
Global authorities are in daily contact with each other on a wide range of issues, including currencies, Kanda said. The market is paying attention to currency levels and there is a strong sense of caution about currency intervention, the Japanese official said.
Kanda said his colleagues in Washington have no problem with the Japanese intervention. “The most important thing for them is transparency,” he said. Kanda said a US decision to add Japan to the currency watchlist had no impact on Japan’s currency strategy.
(Updates with chart and analyst commentary)
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