By Leika Kihara and Satoshi Sugiyama
TOKYO (Reuters) – Japanese Finance Minister Shunichi Suzuki said authorities were analysing not just recent yen declines but factors that are driving the moves, and repeated that Tokyo stood ready to respond to any excessive currency swings.
Suzuki said finance leaders from the Group of 20 major economies, who will meet in Washington D.C. next week on the sidelines of the spring International Monetary Fund (IMF) gatherings, may discuss currency moves as part of topics for debate.
While a weak yen brings some benefits and drawbacks to the economy, it can hurt consumers by pushing up inflation, he said.
“I can’t comment specifically on recent currency moves. But it’s important for exchange rates to move stably reflecting fundamentals. Excessive volatility is undesirable,” Suzuki said.
“If there are excessive moves, we will respond appropriately without ruling out any options,” he told a press conference on Friday.
Suzuki said he was coordinating closely with top currency diplomat, Masato Kanda, to deal with yen moves, but declined to comment on whether they were preparing to intervene in the market to prop up the currency.
Fading expectations of a near-term U.S. interest rate cut have accelerated the dollar’s ascent as markets focused on the starkly wide U.S.-Japan yield gap.
The yen’s slide against the dollar has brought intervention fears back as authorities in Tokyo have repeatedly warned over recent weeks that they would not rule out any steps to deal with excessive swings.
After hitting a fresh 34-year high of 153.32 yen overnight, the dollar stood at 153.18 yen in Asia on Friday.
A weak yen has become a source of headache for Japanese policymakers because it inflates the cost of importing fuel and raw material, thereby hurting retailers and households.
Household spending fell for a 12th straight month on February as many consumers have yet to see wage growth exceed the pace of inflation.
A poll by think tank Japan Center for Economic Research, released on Wednesday, showed analysts expect Japan’s economy to contract an annualised 0.54% in the first quarter due to weak consumption and output, before rebounding by 1.69%.
The yen’s renewed declines complicate the Bank of Japan’s deliberations on the timing of a next interest rate hike, which analysts expect to happen sometime later this year.
BOJ Governor Kazuo Ueda told parliament on Wednesday the central bank would not directly respond to currency moves in setting monetary policy. But he said the BOJ could respond if yen moves have a big impact on the economy and prices.
Japan last intervened in the currency market in 2022, first in September and again in October, to prop up the yen.