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Japan says it’s on standby to deal with ‘one-sided’ currency moves as yen tumbles

Japan says it's on standby to deal with 'one-sided' currency moves as yen tumbles
© Reuters. FILE PHOTO: Japan’s vice minister of finance for international affairs, Masato Kanda, poses for a photograph during an interview with Reuters at the Finance Ministry in Tokyo, Japan January 31, 2022. REUTERS/Issei Kato

By Takaya Yamaguchi and Leika Kihara

TOKYO (Reuters) -Japan’s top currency diplomat Masato Kanda said on Wednesday authorities were on standby to respond to recent “one-sided, sharp” moves in the yen, escalating his warning against speculators as the currency tumbled below a crucial level.

Markets have been on alert in recent months for possible yen-buying intervention by Japanese authorities, who are under pressure to combat a sustained depreciation of the currency as it pushes up import prices and households’ cost of living.

On Tuesday, the yen came under renewed and broad-based selling pressure after a tweak to the Bank of Japan’s yield control policy was seen by markets as insufficient to close the wide interest rate gaps that have pressured the currency for years.

“Speculative trading seems to be the biggest factor behind recent currency moves,” Kanda, vice finance minister for international affairs, told reporters on the yen’s declines.

The situation surrounding yen moves has become “more tense” than before, he said, adding that authorities will “respond appropriately without ruling out any options”.

“We’re on standby,” Kanda said when asked about the chance of yen-buying intervention, though he declined to say what kind of action authorities could take and when that will happen.

Chief Cabinet Secretary Hirokazu Matsuno also told reporters on Wednesday that authorities were ready take appropriate action “without ruling out any options” against excessive yen moves.

The tone of authorities’ warnings was stronger than those made last week, when Finance Minister Shunichi Suzuki said excessive currency volatility was undesirable and authorities were watching moves with “a strong sense of urgency.”

The yen tumbled to a one-year low against the dollar and touched a 15-year low against the euro on Tuesday as the BOJ’s decision disappointed markets expecting a bigger step towards ending years of massive stimulus.

The Japanese currency bounced 0.27% to 151.26 per dollar on Wednesday following Kanda’s warnings, but remained close to one-year lows of 151.74 touched the previous day.

Tokyo intervened in September of last year, its first foray the market to boost its currency since 1998, after a BOJ decision to maintain its ultra-loose monetary policy drove the yen as low as 145 per dollar. It stepped in to the market again in October 2022 after the yen plunged to a 32-year low of 151.94.

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