Noda Silent on Yen Even as Appreciation Clouds Threatens Japan's Recovery

Japanese Finance Minister Yoshihiko Noda has refrained from commenting on the yen’s advance, departing from his predecessor’s attempts to curb volatility by speaking about movements in foreign-exchange markets.

When asked by reporters today about the currency, which has hovered near a seven-month high against the dollar since the European bank stress tests, Noda declined to comment other than to say that investors welcomed the results of the examination. He was also silent on the currency last week, even as fellow Cabinet ministers warned the movements could destabilize growth.

Noda’s silence sets him apart from his predecessor Naoto Kan, who weakened the yen in his first day of office by telling reporters he wanted it to drop “a bit more.” The currency’s advance has been driven by its appeal as a relatively safe asset and talking it down may do little to reverse the trend, according to economist Masamichi Adachi.

“Noda is aware that any attempts may be in vain,” said Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo.

Noda’s colleagues have expressed concern about the currency’s advance, with Trade Minister Masayuki Naoshima saying last week the gains pose a risk to growth and Keisuke Tsumura, a parliamentary secretary at the Cabinet Office, describing the level as “a bit too high.”

Refraining from discussing the currency is also in contrast from the ruling Democratic Party of Japan’s first finance chief Hirohisa Fujii, who said in September that market intervention can “destroy a free economy.” Noda has been finance chief since Kan became prime minister in June.

Six-Year Record

Some analysts say the Finance Ministry may preserve its six-year record of staying out of currency markets even though the yen has advanced 7.2 percent per dollar and 8.6 percent against the euro in the past three months. The yen traded at 86.99 per dollar at 2:30 p.m. in Tokyo, close to a seven-month high of 86.27.

Group of Seven members have refrained from coordinated intervention for almost a decade, since an effort in 2000 to buttress the euro.

Japanese officials will be reluctant to intervene to weaken the yen as long as U.S. policy makers continue to press China to let its currency appreciate, said Mansoor Mohi-uddin, chief currency strategist at UBS AG in Singapore.

The Japanese Finance Ministry “has not been vocal about recent foreign exchange developments, as it has in the past before intervening,” Singapore-based Mohi-uddin wrote in a note published today. “The prospects for Japanese action to weaken the yen still appear low.”

‘Abnormal’

Gains in the currency can erode exporters’ profits when they are repatriated. Koji Miyahara, chairman of Nippon Yusen K.K., Japan’s biggest shipping line, this month described the yen’s current level as “abnormal.”

“If the yen appreciates significantly, we may see government officials voice their concerns,” said Tohru Sasaki, chief strategist in Tokyo at JPMorgan Chase & Co. and former head currency trader at the Bank of Japan. “They won’t resort to intervention because the yen’s gain isn’t being driven by speculation.”

Not everyone is willing to rule government action out. Analysts including Makoto Noji at Mizuho Securities Co. in Tokyo say Noda may be compelled to change his strategy should the yen approach the 14-year high of 84.83 set last November, increasing the risk a stronger currency will derail the country’s export- led rebound.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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