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As the U.S. keeps up pressure on Japan not to intervene over the yen, experts will be watching what Group of Seven finance chiefs have to say about Tokyo’s readiness to sell the currency in the event that it continues rising.

Finance ministers and central bankers begin a two-day meeting in Sendai on Friday at which they will discuss the world economy, sustainable development and cross-border financial flows.

Experts warned of possible reaction by the yen to whatever the ministers have to say about the foreign exchange market.

A sharp advance by the yen would be Prime Minister Shinzo Abe’s worst nightmare, coming on top of continued stagnation despite Abenomics and just ahead of an Upper House election in July.

A strong yen would hit exporters and potentially trigger a stock sell-off.

The yen spiked sharply against the dollar and stocks slumped on April 28, when the Bank of Japan held off from further monetary easing. This was because many market participants were betting on more stimulus.

“People are trying to get a hint of how tolerant the G-7 nations would be of Japanese interventions,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.

Yet, Kumano said it is hard for Japan to intervene in the currency market unless the yen spikes sharply, since doing so would hurt the government’s efforts to seek coordinated fiscal spending at the G-7 Ise-Shima summit next week to shore up the global economy.

On May 3, the yen briefly touched ¥105.55, its strongest level this year.

Since then, Finance Minister Taro Aso has reiterated that the country is ready to intervene in the foreign exchange market, declaring that such action would be justified by Group of 20 agreements.

G-20 communiques in Shanghai in February and in Washington in April affirmed that “disorderly movements in exchange rates can have adverse implications for economic and financial stability.”

But the U.S. Treasury has responded negatively to the idea of Japan massaging the yen. Treasury Secretary Jack Lew has said Japan needs to focus on domestic demand. He called moves in the foreign-exchange market “orderly,” a warning that the U.S. does not view yen intervention as warranted.

Washington has made it clear it opposes competitive devaluation. Lew’s comments followed the U.S. Treasury’s revelation in late April that it has placed China, Taiwan, South Korea and Japan on a new currency watchlist.

Also last week, Lew said major G-7 economies should refrain from a currency war. He told Aso at a G-20 meeting in April that the markets were “orderly” despite a rising yen — a view that likely remains unchanged.

The recent G-20 communiques also included a line declaring that member nations “will refrain from competitive devaluations.”

Unlike G-20 gatherings, G-7 financial chief meetings do not release communiques. The exception was one in April 2014, after Russia annexed Crimea.

Kenji Yumoto, vice chairman of the Japan Research Institute, said the G-7 finance ministers are likely to repeat what was pledged at the G-20 meetings.

Since Tokyo’s stance and Washington’s outlook are widely different, the most the G-7 nations can do is “repeat what has already been said,” Yumoto said.

Kumano of Dai-ichi Life said: “If they think Japan would be unable to intervene, it is very possible that the yen jumps to ¥105 again.”

Yumoto echoed this, saying the dollar would naturally dip below ¥100 if the Unites States holds off monetary tightening later this year or even moves to ease credit by the end of the year. But he added, this scenario is unlikely to happen soon.

The dollar briefly fell below ¥106 for the first time in about 19 months earlier this month but has hovered between ¥107 and ¥110 in recent weeks mainly due to fears that Japan may intervene in the currency market to cap sharp gains by the yen.

A surge in the yen can have a significant impact on corporate earnings as it erodes profits logged overseas and weakens the price competitiveness of Japanese products sold abroad.

For example, in the case of Toyota Motor Corp., a ¥1 move against the dollar means a change in operating profit of ¥40 billion. The world’s largest automaker announced last week that it has now forecast a bigger-than-expected 35 percent tumble in net profit for the current business year to March 2017 due to the sharp appreciation of the yen.

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