Japan Maintains Warnings Against Sharp Yen Falls

Japan stands ready to take all possible measures to counter excessively volatile currency moves, Chief Cabinet Secretary Yoshimasa Hayashi said on Tuesday (Jul 16), keeping markets on alert over the chance of renewed intervention to prop up the yen.

"It is important for currency rates to move stably reflecting fundamentals. Excessive volatility is undesirable," Hayashi told a regular news conference.

"We will closely watch exchange-rate developments and stand ready to take all possible measures," he said. Hayashi declined to comment when asked whether Tokyo intervened in the currency market to prop up the yen for two straight days last week.

The yen jumped 3 per cent against the dollar to 157.40 after Thursday's suspected intervention. But it lost most of its ground and stood at 158.62 on Tuesday, not far off the 160 mark seen as Japanese authorities' line-in-the-sand for currency intervention.

Some analysts see similarities between last week's suspected intervention and that on May 1, when dovish comments from Federal Reserve Chair Jerome Powell weighed on the dollar.

In both cases, Tokyo likely intervened when the dollar was already on the back foot against the yen, said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

"This time, intervention came when the dollar/yen wasn't necessarily rising sharply," he said. "This suggests authorities were worried more about the level of the yen, at below 160 (to the dollar), rather the speed of its falls."

While a weak yen gives exporters a boost, it has become a source of concern for Japanese policymakers as it hurts consumption by inflating the cost of fuel and food imports. Japanese authorities have recently made it standard practice to not confirm whether they have intervened in the currency market or not.