Japan mulls another FX intervention

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TOKYO: Japan is considering intervening in the currency market again to stem further yen gains after the currency’sovernight ascent to a fresh record high against the dollar, the Nikkei newspaper said yesterday.

If the yen continued to rise, Japanese authorities would step into the market to weaken the currency and would seek understanding for its unilateral action from its Group of Seven counterparts, the paper said without citing sources.

Growing volatility in global markets had raised investors’ appetite for safe-haven currencies like the yen, pushing down the US dollar to a record low against the Japanese currency on Friday.

It bounced back above 76 yen after falling below its previous record low of 76.25 set in March. If yen rises persist, the Bank of Japan (BOJ) might also ease monetary policy to support government efforts to weaken the yen at its rate review next month or even earlier, sources familiar with the central bank’s thinking said.

Tokyo intervened in the exchange-rate market and eased monetary policy earlier this month, but the measures hade not kept the yen from rising as investors sought the currency as a safe-haven against risk.

Japanese policymakers had continued to issue verbal warnings of intervention to stem sharp yen gains since then, while the BOJ had signaled its readiness to ease further if sharp yen rises hurt business sentiment and threaten prospects of economic recovery.

Some in the central bank did not rule out easing policy at an emergency meeting this  month, although the chanceof this was small unless yen gains were sharp enough to trigger currency intervention and were accompanied by big falls in Tokyo share prices.

But analysts doubted whether such measures would be effective in countering broad US dollar weakness in the market. — Reuters