Japan may intervene to tame the surge in the yen

JAPAN prepared financial markets for currency intervention yesterday after the yen tested record highs, signalling it may try to tame the currency with yen-selling and monetary easing.

A near five per cent surge in the yen in the past month has raised concerns among exporters such that the currency’s strength will harm the economy, already in recession following the March earthquake and tsunami.

The yen traded as high as 76.29 per dollar on the EBS platform on Monday, near its March record high of 76.25.

Even as it pulled back to 77.40 yesterday, Japanese officials adopted a new, more direct tone, suggesting they were increasingly convinced markets needed a nudge to keep the yen at levels the economy could live with.

“The yen is being valued stronger than we think ... I’d like to watch currency market conditions especially carefully today,” finance minister Yoshihiko Noda told parliament.

Reinforcing a sense of urgency, the central bank will probably ease its monetary policy if the finance ministry decided to intervene and sell yen, according to sources familiar with the central bank’s thinking.