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Japan Will Take Decisive Steps on Yen If Needed, Noda Says

Japanese Finance Minister Yoshihiko Noda
Japanese finance minister Yoshihiko Noda. Photographer: Tomohiro Ohsumi/Bloomberg

Japanese Finance Minister Yoshihiko Noda said the government will take decisive action if needed in foreign-exchange markets, adding that he has become “more concerned” about the currency’s appreciation.

“I have become more concerned about the worsening of the yen’s one-sided movements,” Noda told reporters in Tokyo today. “I will take bold actions if necessary and won’t rule out any possible options.”

Japan’s currency weakened in Tokyo today, retreating from a postwar high of 75.95 per dollar set Aug. 19 in New York, after the Nikkei newspaper reported officials were prepared to intervene if the currency continues to advance. Authorities sold yen on Aug. 4 to prevent gains from derailing the nation’s recovery from a record earthquake.

“The effect of verbal intervention won’t last long,” said Koji Fukaya, chief currency strategist in Tokyo at Credit Suisse Group AG, adding that intervention could happen at “any time” given the yen’s strength. “Japan needs an actual bullet to keep speculative traders scared. If they talk the talk they need to walk the walk.”

The yen traded at 76.63 per dollar as of 10:40 a.m. in Tokyo today. It has risen more than 6 percent in the past three months, making it the best performer of 10 major currencies tracked by Bloomberg after the Swiss franc. Noda said the ministry will examine if speculation is behind the gains in the currency.

‘Worrying’ About Yen

Bank of Japan Deputy Governor Hirohide Yamaguchi said in Beijing yesterday he was “worrying” about the yen’s gains, noting also that a stronger currency won’t “necessarily” damage the economy.

The comments were later clarified by a central bank official in Tokyo, who said that while the deputy governor doesn’t see currency gains having a big effect on the economy immediately, he is concerned about what the effect may eventually be.

Japan’s Finance Ministry probably wants to seek coordinated action with the central bank to combat the strong yen, according to Fukaya at Credit Suisse. The BOJ added stimulus by boosting its credit and asset-buying programs when authorities intervened on Aug. 4.

The central bank may meet before its planned Sept. 6-7 policy meeting, local media including the Nikkei newspaper reported. The BOJ may want to wait until next week to weigh easing policy to gauge financial market movements after U.S. Federal Reserve Chairman Ben S. Bernanke meets his counterparts this week in Jackson Hole, Wyoming, according to analyst Kiichi Murashima.

“The chance of the BOJ easing policy this week is pretty low,” said Murashima, chief economist at Citigroup Global Markets Japan Inc. in Tokyo. “If they were to do it by holding an emergency meeting it will probably be next week.”

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