Tokyo: Japan’s finance minister Yoshihiko Noda on Thursday renewed his threat that the government will intervene in currency markets to stem the yens’s strength if needed.
“Excessive volatility in exchange rates have a negative impact on economic and financial stability, and we can’t overlook it,” Noda said in a parliamentary session, according to Dow Jones Newswires.
“We will continue to watch foreign-exchange developments with great interest and we will take decisive action, including intervention, if needed,” he said as the unit hovered near 15-year highs against the dollar.
Noda made the remarks as the Bank of Japan kicked off its two-day policy board meeting on Thursday, an event brought forward to follow a US federal reserve meeting that concluded Wednesday with fresh stimulus measures.
In October, Japan’s central bank surprised markets by adopting a near-zero rate policy and announcing a five trillion yen (61 billion dollar) asset purchase scheme to lower borrowing costs and tackle deflation.
The dollar lost ground against its rivals Thursday after the Fed said it would purchase 600 billion dollars worth of bonds by the middle of next year to help safeguard the recovery, in what is known as quantitative easing.
The federal open market committee said it would buy up new treasury debt at a rate of around 75 billion dollars a month, a scale not seen since the depths of the economic crisis.
While the size of the asset-purchase scheme was slightly bigger than expected, the move had been anticipated by traders, with the dollar falling against rivals in the weeks leading up to Wednesday’s move.
The yen’s strength has hurt the competitiveness of Japan’s crucial export sector, despite the first yen-selling intervention by authorities in September for six years.
A strong yen not only makes Japan’s growth-driving exports more expensive but erodes companies’ overseas profits when repatriated, with many companies considering sending more production overseas as a result.
The dollar fetched 80.78 yen in Tokyo afternoon trade, down from 81.12 late Wednesday in New York, where the greenback rose as investors adjusted dollar-short positions after the Federal Reserve’s meeting.