By Makiko Yamazaki and Kanupriya Kapoor
TOKYO (Reuters) – Japan’s top currency diplomat Masato Kanda said on Tuesday authorities were ready 24 hours a day to handle foreign exchange matters, but declined to comment on whether the Finance Ministry had intervened a day earlier to support the yen.
“We are ready 24 hours a day, so whether it is London, New York or Wellington, it makes no difference,” the Deputy Finance Minister for International Affairs told reporters.
His comments come a day after Japan’s currency rose as much as five yen against the dollar in what traders called an intervention. Japanese markets were closed on Monday for a holiday.
Prime Minister Fumio Kishida told reporters later on Tuesday that the government had said it would not comment on currency movements and interventions, when asked whether authorities had intervened in the foreign exchange market on Monday.
The dollar last stood at 156.70 in Asia on Tuesday.
The Wall Street Journal reported that Japanese financial authorities had intervened in the market, citing people familiar with the matter.
Kanda declined to comment on Monday when asked about intervention, but said current developments in the foreign exchange market are “speculative, rapid and abnormal” and cannot be overlooked.
Asked again about intervention on Tuesday, Kanda declined comment but said excessive currency movements caused by speculators would have a negative impact on people’s daily lives.
“Higher prices of imports would hit the most vulnerable people and could slow Japan’s momentum to raise real wages,” he said.
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“The government should respond to such steps,” Kanda said. “We would act in accordance with the rules laid down in international frameworks” such as the Group of Seven Advanced Countries and the International Monetary Fund (IMF), he added.
In addition, Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, said the lender sees Japanese authorities fully committed to a flexible exchange rate regime and is in close discussions with them.
While the yen’s recent weakness largely reflects interest rate differentials, other factors are playing an increasingly important role in these moves, including large carry trade positions, he said, speaking in Singapore about the lender’s outlook for Asia-Pacific . He declined to comment specifically on the yen’s movements in recent days.
“We need to work with Japanese authorities to get a more complete picture of what moves the yen and the relative contributions of different factors,” he added.
In carry trades, investors borrow in a low-interest currency, such as the yen, and invest the proceeds in higher-interest currencies.
While Japan implemented its first rate hike in 17 years in March, investors remain unconvinced that rates will rise anytime soon from here, which has only helped strengthen trading positions.
Group of Seven financial leaders this month agreed to a Japanese proposal to reaffirm their belief that excessive volatility and disorderly movements in the currency market are undesirable.
In the first trilateral financial dialogue since last year’s three-way leaders’ summit at Camp David, the US, Japan and South Korea agreed to consult on currency markets, acknowledging Tokyo and Seoul’s respective concerns about their collapsing currencies.
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The meetings were widely believed to have given Tokyo permission to enter the foreign exchange market to halt the currency’s steep declines.
