Japanese authorities voiced growing concern at the yen’s surge as the U.K. voted to leave the European Union, with Finance Minister Taro Aso saying he’s ready to act in markets iF needed.
“We are very concerned about the risks this will have on the world economy, finance, currency markets and other areas,” Aso told reporters in Tokyo, after the yen gained to as high as 99.02 per dollar. “In the foreign exchange market, we are seeing some very nervous moves, and so that these kinds of moves don’t continue, we are watching it with a sense of concern that is higher than before, and we will respond properly if needed."
Aso declined to comment on potential unilateral intervention or coordinated action with Group of Seven counterparts. Global investors bought the yen in a flight to safe-haven assets, further eroding the currency advantage Japanese exporters had enjoyed during the early years of the Shinzo Abe administration.
“There is a possibility for FX intervention,” said Hiroaki Muto, chief economist at Tokai Tokyo Research Center in Tokyo. “There is a clear reason as the currency market is very volatile, so it may be justified to intervene in the market to stem the yen’s rise.”
Bank of Japan Governor Haruhiko Kuroda, said he will continue to monitor the impact of Brexit on global financial markets and stands ready to use swap lines with major central banks including the U.S. Federal Reserve and the European Central Bank. The comments from Kuroda, who is in Switzerland, came via e-mail.
Aso and the BOJ’s Deputy Governor, Hiroshi Nakaso, are speaking later Friday at an event in Tokyo.
The strong yen cuts corporate profits for large Japanese companies, in turn weakening business investment and the prospects for wage gains and consumer spending.
The yen’s appreciation works against Kuroda’s efforts to achieve his 2 percent inflation target by lowering the price of imported goods.
The next scheduled policy meeting of the BOJ is July 28-29. Tokai Tokyo’s Muto said he views an expansion of monetary stimulus as a done deal at the meeting.