In a rare remark indicating the level that could trigger intervention in financial markets, Finance Minister Jun Azumi said Friday he instructed monetary authorities in October to step in to stem the yen’s rise after the dollar fell to ¥75.63.
Azumi later denied he meant a specific exchange rate level that Tokyo would tolerate for the yen’s appreciation, which has negatively impacted the country’s economy by slowing exports.
“When the dollar fetched ¥75.63, I gave an instruction, believing that unless we intervened, the Japanese economy would fall into a critical situation,” Azumi told a session of the House of Representatives Budget Committee.
He also said he had ordered the Finance Ministry and the Bank of Japan to stop the intervention after the dollar recovered to ¥78.20. The yen-selling operation was “effective to some extent” because the dollar traded in a range between ¥77 and ¥78 toward the end of last year, he said.
Japan sold a record ¥8.07 trillion in the intervention conducted Oct. 31 and an additional ¥1.02 trillion during the four days through Nov. 4, according to ministry data.
Azumi told reporters later in the day that in the Diet, he only confirmed the numbers mentioned by an opposition lawmaker who questioned him. “It is not that I mentioned any (specific) level” to order an intervention.
Aid for Europe via IMF
Japan is considering providing financial aid to Europe through the International Monetary Fund to ease tensions over the sovereign debt crisis, Finance Minister Jun Azumi said Friday.
“We are considering it. But we are not in the phase of (specifically) mentioning it,” Azumi said. He denied Tokyo has already determined a figure for the loans.
The IMF estimates there will be a $1 trillion global financing gap over the coming years as a result of resource shortages at the Washington-based lender and the eurozone bailout fund.
The IMF says half of the sum should be covered by strengthening its financial base and the other half must come from European efforts.
“Japan has always contributed to the IMF,” Azumi said, adding, “We understand the IMF’s position.” Japan is the IMF’s second-biggest stakeholder after the United States.
The Group of 20 advanced and major developing economies will hold a meeting of finance ministers and central bank governors later this month. Azumi stressed that the G-20 needs to exchange opinions, while the European Union has pursued establishing a “firewall” to prevent the fiscal problems in some eurozone members from contaminating the region.
The minister said that what the IMF should do will become clear as the discussions proceed, adding that Japan “would like to cooperate” if there is a reason to do so, indicating that aid would come only after Europe makes sufficient efforts by itself to curtail the crisis.
Japan will discuss the issue with non-European countries, including the United States and China, he said.
Multilateral vs. unilateral
European Central Bank President Mario Draghi said Thursday that intervention in the foreign exchange market should be carried out on a multilateral rather than unilateral basis.
“The intervention ought to be a sign that if they are needed, they should be done in a multilateral framework,” Draghi said when asked about the surprise interventions the Bank of Japan conducted last November.
“They should not be unilateral,” he said.
Finance Ministry data show Japan sold ¥1.02 trillion in “stealth” interventions in early November to stem the yen’s persistent appreciation against the dollar.
The United States has already indicated it does not back Japan’s unilateral interventions.