A senior Japanese finance ministry official said on Thursday the government could intervene without warning to weaken its currency, escalating a verbal campaign to cool the rising yen that traders say may ultimately prove unsuccessful. The official spoke to reporters shortly after the dollar spiked by about one yen on what traders cited as large bids by a US bank.
The official declined to comment on whether Japanese intervention also caused the sudden fall in the yen, in a sign of the growing tension over currency moves. Japanese Finance Minister Yoshihiko Noda also said on Thursday yen strength didn't reflect economic fundamentals after it rose to a fourth-month high versus the dollar following Federal Reserve Chairman Ben Bernanke's comments that he could ease monetary policy further if US economic growth stalls.
"I will not comment," the senior finance ministry official said when asked whether Japan intervened in the market. "It is possible," the official also said, when asked whether Japan could intervene before the finance minister uses even stronger verbal intervention.
The warnings were sharper than those made on Wednesday, when the finance minister said recent yen rises had been "a little one-sided" as Japan looks to instill more doubt among speculators who might be looking to buy the yen further.
"The movement doesn't reflect fundamentals and has been one-sided," Noda told reporters on Thursday, regarding the yen's recent surge. "It would be troublesome if it persists, and I will continue to closely watch markets." Noda made no comment about possible intervention in the financial markets.
The dollar bounced to a session high of 79.61 yen, with traders saying that intervention wasn't the likely cause of the move. It earlier slipped to a four-month low of 78.45 yen. The yen has been climbing as investors seek a safe haven from the escalating eurozone debt crisis and mounting doubts about the health of the US economy. The dollar came under additional pressure after Moody's Investors Service said the United States may lose its top-notch credit rating if lawmakers fail to increase the country's debt ceiling.
"Noda has stepped up his warning against the yen's rise as Japanese authorities are getting worried about how much further the currency will strengthen," said Makoto Noji, senior bond and currency strategist at SMBC Nikko Securities in Tokyo. "But it is hard for Japan to intervene in the market, since that sort of beggar-thy-neighbour action would not gain understanding from other countries with four months having passed since the quake."
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