Japan Resumes Intervention Drumbeat After Yen’s Best Day in May

Japanese Finance Minister Taro Aso is letting the currency market know what he considers to be excessive moves that could push the government toward intervention for the first time since 2011.

A two-day move of 5 yen in either direction would be considered one-way and lopsided, Aso said in parliament on Tuesday, adding that the government has no intention of further lowering the currency to boost competitiveness and absolutely no intention of devaluing the yen in a sustained manner. The last time the yen strengthened about 5 yen versus the dollar in two days was after the Bank of Japan left policy unchanged April 28.

“The yen declined as far as 105, 106 per dollar and it’s now around 109 yen, so if I were to say it’d be good for it to settle around there that would immediately be news, so I need to tone down my remarks,” Aso told lawmakers in Tokyo.

The yen fell 0.2 percent to 109.40 per dollar as of 12:45 p.m. in Tokyo from Monday, when it jumped 0.8 percent in the biggest gain since April 29. It has weakened more than 3.5 percent since reaching an 18-month high of 105.55 on May 3.

‘Disorderly Movement’

“There is no definition of what is a disorderly movement,” so it’s impossible to deny Aso’s contention, said Tohru Sasaki, a former central-bank official who’s now head of Japan markets research at JPMorgan Chase & Co. “If they keep saying that they are going to intervene if necessary, people will worry, and that can stop speculative movements.”

Finance chiefs from the world’s biggest developed economies gathering in Japan last week underscored concerns that global growth is flagging and reaffirmed a pledge not to deliberately weaken their currencies, even as Japan again warned on the yen’s surge. Aso raised the issue of the currency market’s moves in a meeting with U.S. Treasury Secretary Jacob J. Lew on May 21.

“I told him that one-sided, abrupt, and speculative moves were seen in the FX market recently, and abrupt moves in the currency market are undesirable and the stability of currencies is important,” Aso said to reporters at the time.

That stance got short shrift from Lew, who repeated his view that the yen’s movement hasn’t been overly volatile. "It’s a pretty high bar to have disorderly conditions," Lew told reporters.

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