Japan's Aso repeats explicit threat of yen-selling intervention

TOKYO (Reuters) - Japan will intervene in the currency market if “one-sided” yen rises last long enough to hurt its economy, Finance Minister Taro Aso said, issuing the strongest threat of action since the yen started its rapid ascent in the past few weeks.

Japan's Finance Minister Taro Aso delivers his policy speech at the lower house of parliament in Tokyo, Japan, January 22, 2016. REUTERS/Toru Hanai

It was the second straight day Aso explicitly used the word “intervention” in warning investors against pushing up the yen too much, a language the finance minister had avoided using even when the yen was surging at a pace of 5 yen in two days late last month.

Aso told parliament on Tuesday that Japan has no plans to manipulate currency moves on a long-term basis to give its exports a competitive trade advantage.

But he added that it was a shared understanding among G7 and G20 nations that excessive currency volatility was undesirable.

“Japan obviously will intervene if one-sided moves persist,” he said, adding that the yen’s appreciation before and during Japan’s Golden Week holidays last week has been “quite rapid.”

“We’re determined to prevent such one-sided moves from accelerating,” Aso said.

The strong warning, which compared with the usual, more indirect language that Tokyo will “act appropriately” against excessive yen gains, underscores the concern Japanese policymakers have over the pain recent yen gains could inflict on the fragile, export-reliant economy.

The jawboning pushed the dollar up nearly 1 percent to around 108 yen on Tuesday, off the 18-month low of 105.55 yen hit last week.

Aso later told parliament that financial markets, not the government, decide appropriate exchange-rate levels, signaling that Japan won’t target a specific yen level in deciding whether to step into the market.

But he said the dollar was “now moving around 108 yen” after his warnings that one-sided currency moves are undesirable.

“We frequently have difference in views with the United States on whether currency moves are stable or not,” Aso said, adding that such disagreements would not constrain Tokyo’s currency policy.

Japanese authorities have stayed away from the markets since they last intervened in 2011. At the time, Tokyo got G7 consent to intervene to stem a yen spike driven by speculation that a devastating earthquake would force Japanese insurers to repatriate overseas funds to pay for damage claims.

Reporting by Leika Kihara; Editing by Simon Cameron-Moore & Shri Navaratnam