Japan repeats warnings on yen as market watches for intervention

© Reuters. FILE PHOTO: Banknotes of Japanese yen are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/Illustration/File Photo

By Tetsushi Kajimoto and Leika Kihara

TOKYO (Reuters) -Finance Minister Shunichi Suzuki warned on Tuesday that Japan would take appropriate and decisive action against excessive, speculator-driven currency moves, keeping alive the possibility of more market intervention after the yen hit a new 32-year low.

Suzuki also reiterated that the authorities could intervene without any announcements, but did not comment on whether they had actually done so, when pressed on speculation that Japan may be supporting the yen without publicly acknowledging it.

"We are closely watching market moves with a high sense of urgency. We will make an appropriate response decisively to excessive moves," Suzuki told a session of parliament on Tuesday.

Pressed by an opposition lawmaker on what a decisive response would mean, he added: "We intervened in the currency market as a decisive measure (on September 22₎."

Suzuki, speaking to reporters earlier on Tuesday, declined to comment whether authorities were conducting stealth intervention to support the weakening yen.

"Generally speaking, there are times when we intervene by making announcements and some other times when we do without it," he said, reiterating comments last week after meetings of financial leaders in Washington. He did not comment further on the matter.

The yen slipped to 149.10 to the dollar before the start of Asia trade on Tuesday, its weakest since August 1990, putting the major psychological barrier of 150 in focus.

Policymakers, who once zeroed in on yen strength as a source of concern for the trade-oriented economy, are now worried that the yen's sharp fall is boosting already high commodity import costs, squeezing households, and upending business plans.

Authorities have fired verbal warnings against the yen's descent almost daily since early September, when it reached 144 to the dollar as rate hikes by the Federal Reserve boosted the U.S. currency.

Suzuki first acknowledged yen weakness as negative for the economy in April, when it was trading around 126 per dollar. It has continued to fall sharply and is down about 20% since the start of the year.

Japan spent 2.8 trillion yen ($18.81 billion) in dollar-selling, yen-buying intervention last month when authorities acted in the markets to prop up the yen for the first time since 1998.

Estimates by the Bank of Japan released last Friday showed that excess reserves parked by institutions at the central bank would likely have declined 4.09 trillion yen as of Monday, Oct. 17, due in part to actions that could be related to currency intervention.

The BOJ's previous estimate, released on Sept. 30, indicated a decline of 2.9 trillion yen as of the start of October.

The gap of more than 1 trillion yen could reflect funds absorbed from excess reserves as a result of yen-buying, dollar-selling intervention. This has fuelled speculation among market players that the government and the central bank may have intervened in the market without announcing it.

At Tuesday's parliamentary session, Prime Minister Fumio Kishida joined in warning that rapid, speculation-driven currency moves were problematic.

Kishida brushed aside the dominant market view that the Bank of Japan's ultra-easy monetary policy was largely behind the yen's sharp declines, saying that currency rates move on various factors, not just on U.S.-Japan interest rate differentials.

"The Bank of Japan decides monetary policy based not just on currency moves but comprehensive factors, such as economic and price developments as well as the impact on small and midsize firms," Kishida said.

Kuroda, who was also appearing in parliament after attending last week's meetings of global financial leaders, suggested that the dollar's strength may not persist.

"The dollar has become very strong against all currencies around the world," Kuroda said. "But few of the people I met in Washington were thinking that it would last long."

($1 = 148.8400 yen)