TOKYO: Japan's finance minister warned on Friday about the yen's weakening, describing it as "too rapid", but he stuck to the government's stance of allowing markets to determine exchange rates and dismissed the need to intervene to halt the slide.
Speaking to reporters after a cabinet meeting, Taro Aso said rapid currency moves, whether up or down, were undesirable. Aso's remarks prompted a spike in the yen versus the dollar.
The dollar fell to as low as 117.45 yen from around 118 yen, after hitting a seven-year peak of 118.96 versus the yen earlier this week.
"The yen's depreciation against the dollar over the past week has been too rapid.
A rapid swing in currencies, whether up or down, should not be welcome as it causes various impacts," Aso said. Aso dismissed the need to intervene in the market. "Currencies should be determined by the market, not by intervention," he said. Aso expressed concern that the yen's excess depreciation would boost import costs of energy and other materials, when asked how the impact of a weak yen may become an issue in the upcoming general election expected on Dec. 14.
Aso's latest remarks stand in contrast with his previous stance that a weak yen was still a positive because it helps exporters' earnings. Many small firms and households are worried that the rise in import costs is wiping out the benefits of increased profits.
The yen has tumbled around 10 yen since the Bank of Japan stunned investors by expanding its quantitative easing programme on Oct. 31, while the dollar has firmed on expectations the US central bank will begin raising interest rates next year.
BoJ Governor Haruhiko Kuroda has reiterated that a weak yen is a positive for the Japanese economy on the whole.
Japan last intervened in the markets in November 2011, to stem a strengthening yen.
It last bought the yen to arrest its declline versus dollar in the late 1990s, when the country was grappling with the Asia financial crisis and its own banking crisis.
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