• Bloomberg


Authorities won’t weaken the yen to become more competitive with other countries in trade and any currency intervention would be aimed at restraining excessive moves, Senior Vice Finance Minister Fumihiko Igarashi said Thursday.

“It’s not our intention to engage in a currency-devaluation race for the sake of the national interest,” Igarashi said in an interview. “We could conduct smoothing operations when movements are extremely volatile. That would be permissible.”

The yen hit its highest rate against the dollar since 1995 in New York on Wednesday, surpassing the level at which Japanese authorities last month intervened for the first time since 2004. Finance chiefs from the Group of Seven major industrialized nations are poised to discuss exchange rates at a meeting Friday in Washington.

Currency wars between major countries could derail the global economy’s recovery, Olivier Blanchard, the International Monetary Fund’s chief economist, said Thursday.

The yen, which has risen 12 percent this year, was trading at 82.89 per dollar Thursday afternoon in Tokyo after touching ¥82.77 on Wednesday. Japan sold more than ¥2 trillion in its intervention Sept. 15.

Igarashi, who was appointed to his post last month, is a Democratic Party of Japan politician, who once cited traders as saying Japan’s intervention efforts were “foolish.” The 61-year-old Diet member started out as a political reporter at Jiji Press.

Finance Minister Yoshihiko Noda said he will explain last month’s action to his counterparts at the gathering of G7 finance ministers and central bankers after the action was hit by European officials and U.S. lawmakers. Noda declined comment on the currency’s advance Thursday in Tokyo.

Japan’s sales came after countries from China to Brazil and South Korea pursued steps to limit gains in their currencies. Canadian Finance Minister Jim Flaherty said Wednesday “there are concerns about interventions in currency markets” and he’s “sure” the issue will be discussed in Washington.

U.S. Treasury Secretary Timothy F. Geithner said Wednesday Japan didn’t fuel tensions when it intervened.

He said there’s a “damaging dynamic” at work in currency markets as countries race to limit appreciation. When asked whether he thought Japan had “set the fire” for this dynamic, Geithner responded, “I don’t, no” in remarks at the Brookings Institution in Washington.

In 2004, when his party was in the opposition, Igarashi told the Diet that traders were talking about the government’s “foolish intervention,” because it appeared that authorities were merely trying to use up the money allotted for such action instead of stopping the yen’s appreciation.

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