Japanese officials stepped up their expressions of concern about a soaring yen as the currency’s renewed strength threatened to undermine the government’s Abenomics program for reviving the economy.
With the yen trading near a 15-month high against the dollar, concern is growing that this will reduce the competitiveness of Japanese exports and also cut the value of profits brought home from overseas operations. A weaker outlook for earnings risks undermining the country’s annual round of wage talks, currently underway. And by making imports cheaper, the trend also hurts the Bank of Japan’s campaign to spur inflation.
“As the G-7 and the G-20 have agreed, abrupt market movements are not desirable,” Finance Minister Taro Aso said Friday in Tokyo. “There have been very rough movements in the FX market. We will continue to watch FX markets with a sense of urgency and will respond appropriately when necessary.”
Aso declined to comment on whether Japan might have already intervened in the market; the yen slid briefly in New York on Thursday morning. Ministry officials have spoken repeatedly this week about the yen’s movements, with currency chief Masatsugu Asakawa warning on Thursday — when markets were closed for a national holiday — that he was watching out for any speculative moves.
The yen has strengthened about 7.5 percent this month and was trading at 112.74 to the dollar at 1:49 p.m. in Tokyo.
Bank of Japan Gov. Haruhiko Kuroda said in the Diet that so-called risk-off movements in the markets had spread excessively and that foreign exchange rates should reflect economic fundamentals. Speaking later after a regular meeting with Prime Minister Shinzo Abe, Kuroda said he would watch market moves closely.
Asakawa also briefed the deputy chief Cabinet secretary about the market turmoil.
Aso said that, looking beyond markets, the real economy is healthy and company profits are at record highs.
“Japan’s economic fundamentals are very strong,” he said. “Recently, markets have been too pessimistic. The government won’t be swayed by those market movements. We are communicating with the G-7 and other parties, and considering internal and external factors, we want to work to strengthen private demand.”
Aso will attend a Group of 20 nations meeting in Shanghai later this month at which financial chiefs are expected to discuss how to cope with the current volatility.