Japan has vowed to make unilateral moves to weaken the yen if necessary, in an unusually bold statement of intent.
Jun Azumi, finance minister, said on Friday he would “make appropriate decisions at appropriate times on my own”, a stance that risks friction with the US, Japan’s second-biggest trading partner.
In December the US Treasury Department criticised Japan for its two solo currency interventions in August and October, when it sold yen at times of relatively low market volatility.
Mr Azumi also revealed details of Tokyo’s most recent intervention, in a rare example of a senior finance official speaking openly about currency operations by the government and the Bank of Japan.
Mr Azumi said he had ordered an intervention when the US dollar fell to Y75.63 on October 31, and retreated when the dollar rebounded to Y78.20. He noted that the currency had remained between Y77 and Y78 until the end of the year. Failing to intervene, he said, could have “caused a critical condition for the Japanese economy”.
Junya Tanase, chief currency strategist at JPMorgan in Tokyo, said the detailed account of the intervention was “unusual”. But he cautioned against the view that Y75.63 should be seen as a “line in the sand”.
Mr Tanase noted that Yoshito Sengoku, former chief cabinet secretary, talked of defending the Y82 level after intervening in the market for the first time in six years in September 2010. The yen broke that level within a month. Some analysts say that Mr Azumi may be signalling a shift to a more forthright and unapologetic currency policy from Japan.
“In the past, US approval has been an important condition for Japan to intervene in the market,” said one currency strategist.
This week the dollar has gained 1.4 per cent against the yen. But fundamental support for the Japanese currency remains strong, due to a preference among US and European investors for haven assets and a pronounced home-currency bias among Japanese institutions. The yen has been the best-performing G10 currency in each of the past two years, up 15 per cent and 6 per cent respectively.
The persistent strength of the yen is deepening an export slump that has weakened profits at large manufacturers such as Sharp, Panasonic and Honda. The government said this week that exports in the first 20 days of January fell about a fifth from the previous year, the fastest decline in more than a decade.
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