Japan MOF says ready to respond to excessive FX moves

By Tetsushi Kajimoto

TOKYO (Reuters) – Japan’s top currency diplomat, Masatsugu Asakawa, warned investors on Wednesday against pushing up the yen too fast, saying Tokyo would respond to excessive market moves.

Asakawa made the comment to reporters when asked about the dollar’s fall to a seven-week low below 100 yen on Tuesday.

A rising yen tends to worry Japanese policymakers because it reduces export competitiveness and weighs on corporate earnings, but Japan’s options are limited, because other Group of Seven countries frown upon competitive currency devaluation.

“We would have to respond if there are excessive moves. We’re closely monitoring (the market),” he said, adding that Japanese authorities were exchanging views on the currency market with Group of Seven partners.

The yen has risen around 20 percent versus the dollar this year due to fading expectations for interest rate hikes from the U.S. Federal Reserve.

The yen’s rise is also problematic for Japan because it lowers import prices, making it difficult to shake of deflation.

The Bank of Japan will conduct a “comprehensive review” of its quantitative easing and negative interest rate policy at its meeting next month after repeatedly pushing back the timing for its 2 percent inflation target.

Some economists say the BOJ could use the review to extend easing of monetary policy, potentially weakening the yen if bond yields fall even further.

A preliminary outline of the review shows it will maintain a pledge to hit its 2 percent inflation target as soon as possible, sources told Reuters.

(Writing by Stanley White; Editing by Chang-Ran Kim and Eric Meijer)