• Bloomberg, Kyodo


Finance Minister Yoshihiko Noda told the government with a greater sense of urgency Monday to take decisive action if needed in the foreign-exchange markets to rein in the yen’s soaring ascent against the embattled dollar.

“I have become more concerned about the worsening of the yen’s one-sided movements,” Noda told reporters in Tokyo. “I will take bold actions if necessary and won’t rule out any possible options.”

Prime Minister Naoto Kan and other Cabinet members echoed his view, saying the government is paying closer attention to whether speculative investors have been chasing short-term profits by excessively betting on a stronger yen while barely taking Japan’s economic fundamentals into account.

In jittery Monday morning trading in Tokyo, the dollar hovered around the upper ¥76 level, sometimes supported by purchases from investors cautious about possible intervention aimed at punishing hedge funds and other speculators.

The yen weakened in Tokyo, retreating from a postwar high of 75.95 per dollar briefly set Aug. 19 in New York, after the Nikkei newspaper reported that officials were prepared to intervene if the currency continues to advance. Authorities sold yen on Aug. 4 to prevent gains from derailing the nation’s recovery from the March 11 catastrophe.

“The effect of verbal intervention won’t last long,” said Koji Fukaya, chief currency strategist in Tokyo at Credit Suisse Group AG, adding that intervention could happen at “any time,” given the yen’s strength. “Japan needs an actual bullet to keep speculative traders scared. If they talk the talk they need to walk the walk.”

The yen traded at 76.63 per dollar as of 10:40 a.m. in Tokyo Monday. It has risen more than 6 percent in the past three months, making it the best performer of 10 major currencies tracked by Bloomberg after the Swiss franc. Noda said the ministry will examine if speculation is behind the gains in the currency.

Kan also expressed his concern about Japan’s outlook. The continued rise of the yen will “negatively affect Japan’s economic and financial stability,” he told the Diet.

The yen’s rise against the wilting dollar has been increasingly weighing on the profitability of exporters, stimulating fears this could accelerate a hollowing out of the nation’s manufacturing base as companies leave in search of cheaper operating costs.

Economy, Trade and Industry Minister Banri Kaieda, who has been under pressure to prevent that from happening, called for concerted intervention by Japan and the United States.

Bank of Japan Deputy Gov. Hirohide Yamaguchi said in Beijing Sunday he was “worrying” about the yen’s gains but also noted that a stronger currency won’t “necessarily” damage the economy.

The comments were later clarified by a central bank official in Tokyo, who said that while the deputy governor doesn’t see currency gains having a big effect on the economy immediately, he is concerned about what the eventual impact may pan out to be.

The Finance Ministry probably wants to seek coordinated action with the central bank to combat the strong yen, according to Fukaya at Credit Suisse.

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