TOKYO (Reuters) – Japanese Prime Minister Yoshihide Suga on Friday vowed to work closely with overseas authorities to keep currency moves stable, signalling his readiness to respond to any yen spike that threatens to derail the country’s fragile economic recovery.
“Exchange-rate stability is extremely important,” Suga told parliament, when asked how Japan will respond to any changes a new U.S. administration could make to its dollar policy.
“We will respond appropriately on markets, while keeping in close contact with overseas authorities,” Suga said. He declined to comment on specific currency levels or moves.
Suga’s remarks followed those by Bank of Japan Governor Haruhiko Kuroda, who said on Wednesday the central bank will work closely with financial authorities to help keep currency moves stable.
The dollar fell to 103.59 yen in Asia on Friday, close to an eight-month low, as a contentious U.S. presidential election diminished hopes for large stimulus to support the economy any time soon.
A yen spike has historically been a trigger for monetary easing by the BOJ and jawboning from authorities keen to prevent yen rises from hurting Japan’s export-reliant economy.
Many analysts see 100 yen to the dollar as Japan’s line-in-the-sand. But the hurdle for intervening in the currency market is high, as Tokyo is unlikely to win consent from other countries also suffering from the hit to their economies from the coronavirus pandemic, analysts say.
Some market players expect the BOJ to deepen negative interest rates if the yen spikes, though that option is also controversial given the strain years of ultra-low rates are inflicting on financial institutions’ profits.
(Reporting by Leika Kihara and Kaori Kaneko; Editing by Chang-Ran Kim and Sam Holmes)