Kaieda Signals Overseas Opposition Won’t Deter Yen Intervention

Kaieda Signals Overseas Opposition Won’t Deter Yen Intervent
Banri Kaieda, Japan's economiy minister, speaks during an interview at his office in Tokyo. Photographer: Toshiyuki Aizawa/Bloomberg

Japan is prepared to intervene in currency markets to stem the yen’s advance, Economy Minister Banri Kaieda said, signaling that overseas opposition shouldn’t deter authorities from correcting abrupt moves.

“Japan stands ready to take action whenever it’s necessary,” Kaieda said in an interview in Tokyo today. “Intervention may cause tension with other countries, but I believe those actions are allowed when currencies are moving in a volatile way.”

Japan intervened in currency markets for the first time in six years in September, action that failed to arrest the yen’s advance to a 15-year high against the dollar. Limiting currency gains to protect exporters has become an issue of contention among Group of 20 nations, whose finance chiefs are meeting today to discuss whether to set targets for their trade imbalances to defuse tension over currency devaluation.

Japanese Finance Minister Yoshihiko Noda, who is participating in the G-20 gathering in Gyeongju, South Korea, this week reiterated that the government stands ready to take “bold” action on the yen, including intervention.

The yen has gained more than 5 percent since authorities intervened on Sept. 15 and rose as high as 80.85 per dollar this week, the strongest since April 1995, when a postwar high of 79.75 was reached.

Japan’s intervention “isn’t aimed at maintaining a certain yen level,” Kaieda said. Asked about whether the yen will stay strong, he said that he expects the current trend to continue.

Whenever Necessary

He said Japan can step into the currency markets whenever it determines it necessary, even if it coincides with conferences such as the Group of Seven or Group of 20 meetings.

Japan’s intervention drew criticism from European policy makers and American politicians, with Luxembourg Prime Minister Jean-Claude Juncker, who chairs meetings of euro-region finance ministers, saying the group was “insisting” Japan “step back from unilateral interventions.” U.S. House Ways and Means Committee Chairman Sander Levin called Japan’s move “deeply disturbing.”

Preventing a too-sharp yen advance may help protect exports in Japan, where overseas demand has driven the recovery. Slower global growth is causing companies to pare industrial output as stimulus measures that helped prop up consumer spending expire.

The Bank of Japan cut its key interest rate close to zero on Oct. 5 and Prime Minister Naoto Kan will next week seek approval for his 5.1 trillion yen stimulus package to help jumpstart growth.

Kaieda also said the Cabinet Office wants to hold the first meeting of its panel to discuss the yen’s globalization this month. It will discuss measures to increase use of the Japanese currency in global trade, he said.

“The first step is how to increase yen-denominated trade in the Asian region,” he said.

He also said there is no alternative to the dollar as a reserve currency.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE