* Fin Min Noda says mindful of calls for forex intervention
* Excessive yen rise will hurt manufacturers - Econ Min
* Dlr/yen hits 4-month low after Obama warnings on economy
* Tokyo authorities gearing up for possible intervention
* BOJ also under pressure to ease policy as yen strengthens
(Updates with sources on possibility of solo action)
By Leika Kihara and Tetsushi Kajimoto
TOKYO, July 26 Japan's policymakers, alarmed
that the yen's persistent climb could derail the nation's
economic recovery, see solo market intervention as an
increasingly viable option, sources familiar with the matter
The yen scaled four-month highs against the dollar on
the back of market fears of a U.S. government debt downgrade,
prompting warnings from Japanese officials and executives that
an unchecked yen rise was hurting the export-reliant economy.
Finance Minister Yoshihiko Noda on Tuesday repeated his
mantra about closely watching "one-sided" moves, and other
ministers chimed in with warnings about the risk of the currency
rising too far and too fast.
"Anxiety is running high. It can happen any time," a
government source with knowledge of the matter said, on the
possibility of solo intervention.
Another source confirmed this view, saying that authorities
were prepared to act when the timing is right. Both spoke on
condition of anonymity due to the sensitivity of the matter.
Whether Tokyo will indeed step in -- and if so, when -- will
depend much on the pace of yen rises and whether the moves are
accompanied by sharp falls in stock prices, officials say.
On Monday, the head of Keidanren, Japan's biggest business
lobby, called for joint Group of Seven intervention to stem the
yen's gains as it heads back towards the record high of 76.25
hit days after the March 11 earthquake.
Markets are virtually ruling out a repeat of the coordinated
intervention that the G7 carried out in the quake's aftermath,
but investors are gearing up for a possible solo Tokyo act,
primed by official warnings.
"Movements have been one-sided due to external factors, but
I'll closely watch market moves," Noda told a news conference.
The dollar fell below 78 yen in the morning after U.S.
President Barack Obama warned of dire economic consequences if a
deadlock in talks on raising the debt ceiling were to lead to a
default on bond obligations. It briefly bounced,
but gave up all of its gains later in the day.
"Japanese authorities could intervene solo if the dollar
accelerates its fall and heads toward the all-time low hit
against the yen in March," said Satoru Ogasawara, economist at
BOJ ALSO UNDER PRESSURE
Growing market worries about the possibility of a U.S. debt
default, coupled with Europe's debt problems, have been fuelling
the yen's gains as investors seek the relative safety of Japan's
That clouds the outlook for Japan's economy, which is just
emerging from the post-disaster slump and is relying on its
exports to reignite growth.
But with the currency mainly driven by overseas developments
beyond Japan's control, some market players are sceptical
whether Tokyo would risk acting alone, especially given
uncertainty about the outcome of U.S. debt talks ahead of an
Aug. 2 deadline.
Some policymakers share such concerns, but others say the
prominence of external factors in the yen's rise is no excuse to
hold off on intervention, and worry that Japan's economy is
still too weak to withstand the pain from yen gains.
The yen's climb also puts pressure on the central bank to
ease monetary policy further in the hope of pushing down bond
yields and reining in the currency.
BOJ Governor Masaaki Shirakawa warned on Monday that the
yen's strength could hurt Japan's economic outlook and that the
central bank would consider what it could do to support the
economy in the short term.
Central bank officials say that a yen spike combined with
tumbling share prices would be the most likely trigger for
If the finance ministry decides to intervene, the BOJ may
come under pressure to ease policy to amplify the effect.
The central bank may discuss monetary easing at its next
rate review on Aug. 4-5 or even earlier if the yen continues to
Japan last intervened on its own in September 2010, its
first market foray in six years. The BOJ eased monetary policy
in combination with both the latest solo and coordinated
(Additional reporting by Rie Ishiguro; Writing by Leika Kihara
and Tomasz Janowski; Editing by Edmund Klamann)