JAPAN’S finance minister put traders on alert for possible currency intervention yesterday as the yen's rise to a record high against the dollar threatened to further squeeze exporters' profits and hold back economic recovery.
Japan's export growth showed signs of resilience, slowing less than expected in September, finance ministry data showed, but economists warn that persistent yen strength and Europe's sovereign debt woes pose increasing risks to external demand.
The Bank of Japan, which meets on Thursday, will probably cut its economic forecasts because of slowing global growth but keep monetary policy unchanged unless disappointment over Europe's plans to solve its crisis roils markets.
Even if the BOJ keeps policy unchanged this week, Japan's government and central bank may not be able to hold off from taking action much longer as safe-haven flows keep the yen stubbornly high against the U.S. currency.
“The dollar/yen rate fell sharply, to between 75 and 76 yen, in a short time. This is an utterly speculative move and not reflecting the economic fundamentals at all. This is regrettable,” Finance Minister Jun Azumi told reporters.
“If this move becomes excessive, we have to take decisive action. I already instructed my staff on Saturday to be prepared to take action.”
Azumi added that the strong yen would have a major impact on Japan's export sector, especially the auto industry, and could dent the country's economic recovery from a slump triggered by earthquake and tsunami in March.
Azumi spoke after the dollar hit a record low of 75.78 yen on trading platform EBS on Friday.
City A.M. Reporter