Mindful of U.S. warnings against the recent rise in Japan’s surpluses, high-ranking financial officials April 10 launched a sudden tirade of comments that the recent fall of the yen is excessive and hinted at corrective action. Their remarks effectively halted the yen’s plunge against the dollar, pushing it from the day’s high of 127.16 yen to 126.09-12 yen as of 5 p.m.
Finance Minister Hiroshi Mitsuzuka, speaking at a convention of the nation’s trust banks in Tokyo, said authorities would “act resolutely” to deal with extreme foreign exchange movements — the most candid expression of concern yet during the latest phase of the yen’s depreciation. The remark — unexpectedly strong for a Japanese finance minister — was taken to imply that authorities would not hesitate to intervene in the market if the yen’s slide continues.
In morning trading, the yen weakened past the 127 mark for the first time in four years and eight months against the greenback as market participants continued buying dollars on the belief that authorities will not intervene. The reason behind the yen’s weakness is a disparity in long-term interests between Japan and the United States, dealers said.
Strong among dealers is belief that Tokyo will not raise rates any time soon due to a need to continue indirect support of ailing domestic financial institutions, they said. Also a factor is the need to keep Japanese capital flowing into U.S. stock and bond markets and to support the U.S. economy, they said.
But Eisuke Sakakibara, director general of the Finance Ministry’s International Finance Bureau, reportedly expressed concern in the afternoon that a weak yen could boost Japan’s external surpluses, which have already begun to rise on a year-on-year basis.
Some U.S. auto manufacturers and lawmakers have already begun to express concern about the increasing surpluses.
So far, ministry officials had said the yen’s depreciation had both good and bad effects on Japan’s economy. Vice Finance Minister Tadashi Ogawa said the same day he supports Mitsuzuka’s comments on foreign exchange levels. “Recent (exchange rate) movements are clearly excessive, and we are concerned, and thus we will act accordingly against such movements,” he told a news conference. He added that Japanese financial authorities are in constant contact with their counterparts in the U.S. “We have kept in touch with U.S. authorities over our current perception (of the market) and our ways to deal with it,” he said.