Japanese yen on a slide: Groundwork prepared for appropriate action

TOKYO (Reuters): Japanese Finance Minister Shunichi Suzuki said on Tuesday that last week’s trilateral meeting with his US and South Korean counterparts has laid the groundwork for Tokyo to take appropriate action to deal with excessive yen moves.

“I voiced strong concern on how a weak yen pushes up import costs. Our view was shared not just in a meeting with my South Korean counterpart, but at the trilateral meeting that included the United States,” Suzuki told parliament.

“I won’t deny that these developments have laid the groundwork for Japan to take appropriate action (in the currency market), though I won’t say what that action could be,” he said.

The fresh warnings against excessive currency moves came after the dollar rose to 154.85 yen, its strongest levels against the Japanese currency since 1990, keeping markets on heightened alert for any signs of intervention from Tokyo to prop up the yen.

Last week, finance leaders from the United States, Japan and South Korea agreed to “consult closely” on foreign exchange markets in their first trilateral finance dialogue, acknowledging concerns from Tokyo and Seoul over their currencies’ recent sharp declines.

At a regular post-cabinet meeting news conference earlier on Tuesday, Suzuki stressed that Japanese authorities will work closely with overseas counterparts to deal with excessive volatility in the foreign exchange market.

“We are watching market moves with a high sense of urgency,” Suzuki told reporters, adding that Tokyo authorities were ready to take action “without ruling out any options” against excessive currency moves.

The latest decline in the yen comes after a string of strong US economic data, particularly on inflation, which pushed the dollar to five-month highs and reinforced expectations that the Federal Reserve is unlikely to be in a rush to cut interest rates this year.

While a weak yen boosts exports, it has become a headache for Japanese policymakers as it inflates the cost of living for households by pushing up import prices.

That dynamic has focused market attention on how the yen’s weakness would affect the timing of the next rate hike by the Bank of Japan, after BOJ Governor Kazuo Ueda last week signalled the central bank’s readiness to tighten policy if the weak yen’s boost to inflation becomes hard to ignore.

Japan last intervened in the currency market in 2022, first in September and again in October, to prop up the yen.