by Tetsushi Kajimoto and Leika Kihara
TOKYO, June 10 (Reuters) – Japan’s government and central bank expressed concern over the yen’s sharp depreciation in a rare joint statement released on Friday, fueling speculation that Tokyo might intervene in the markets to prop up the fallen currency at a 20-year low.
Senior monetary official Masato Kanda told reporters after a meeting with his counterpart at the Bank of Japan that Tokyo “will respond flexibly by putting all options on the table.”
Masato Kanda would not say whether the authorities could negotiate with other countries for joint action on the foreign exchange market.
The G7, of which Japan is a part, has long pledged to let markets determine exchange rates, but also to consult closely on excessive and disorderly movements that could harm growth.
“We have seen a sharp decline in the yen and are concerned about recent movements in the currency market,” the finance ministry, the Bank of Japan (BoJ) and the financial services agency said in a joint statement. outcome of a meeting of its leaders.
Officials from the three institutions meet occasionally, most often to express to observers their concern over sharp market moves, but rarely do they issue a joint statement explicitly warning about currency movements.
The Japanese currency gained as much as 0.73% against the dollar after the statement, to 133.35, from a low the previous day since 2002, at 134.55.
“Tokyo could intervene if the yen falls below 135 to the dollar and begins a free fall,” said Atsushi Takeda, chief economist at the Itochu Institute of Economic Research.
“But Washington will not join us, so it will be a solo intervention. For the United States, there is no real interest in joining Tokyo,” he said. added.
Unlike other major central banks, which are tightening their monetary policy in the face of inflation, the BoJ is committed to keeping rates low, making Japanese assets less attractive to investors and contributing to the decline of the yen.
“What can potentially slow the pace of currency depreciation is a change in monetary policy, but so far there is no indication that the BoJ is worried about inflation or the impact of yen weakness on this one,” said Moh Siong Sim, strategist at Bank of Singapore.
“It’s more of a verbal intervention and I’m not sure it will translate into concrete action and impact the yen,” he added.
Given the economy’s heavy reliance on exports, Japan has historically struggled to stem sharp rises in the yen and has taken a hands-off approach to currency declines.
(Report Tetsushi Kajimoto and Leika Kihara; with Kantaro Komiya and Daniel Leussink; Laetitia Volga, edited by Sophie Louet)