The yen on Friday gave up some of this week’s strong gains against the dollar as a government official warned about the impact of its rally, which is threatening to damage Tokyo’s efforts to kickstart the economy.
The Japanese currency has soared to 17-month highs since Monday as worries about the global economy send dealers rushing for the safe haven, while the prospect of US interest rates remaining low for some time has also led to a shift from the dollar.
A strong currency is damaging for Japan’s exporting giants such as Toyota and Sony as it makes their goods more expensive overseas and hits their repatriated profits.
On Friday top government spokesman Yoshihide Suga told a regular news briefing its rise was “one-sided” , adding that “excess volatility and disorderly movements in exchange rates can have adverse implications”.
He went on to say: “The government is monitoring the foreign exchange market closely. Depending on the situation, we will take necessary action.”
He did not say whether intervening in currency markets was on the table.
Prime Minister Shinzo Abe appeared to rule out such a move in a wide-ranging interview with the Wall Street Journal published this week, telling the paper: “Whatever the circumstances, we must definitely avoid competitive devaluation.”
In afternoon trade in Japan the dollar rose to 108.87 yen from 108.31 yen in New York, where it fell at one point to 107.68 yen.
The greenback had started the year above 120 yen and was still at 112 yen last Friday. It has now lost all the gains it had made after Japan’s central bank ramped up its bond-buying stimulus programme in October 2014.
The euro ticked up to 123.66 yen from 123.17 yen, while it weakened to $1.1363 from $1.1372.
The yen’s resurgence is bad news for Abe’s bid to reboot the world’s number three economy, dubbed Abenomics.
The plan relied heavily on Japanese exporters benefiting from a cheap currency, which set off a stock market rally.
But as equity markets sank on worries about the global economy — and confidence in Tokyo’s ability to kickstart growth fades — traders pushed into the yen, which is widely seen as a safe bet in times of turmoil and volatility.
“Japanese officials have been out in force trying to jawbone the yen weaker,” Bank of New Zealand currency strategist Jason Wong said in a commentary.
“Those cries for a reversal have gone unheeded, with the market discounting the possibility of any intervention at current levels, where the yen remains very cheap taking a longer-term perspective.”
The yen hit a record high around 75 against the dollar in 2011.
The dollar has struggled against its major peers after the Federal Reserve released minutes from its March meeting showing US policymakers are unnerved by slower global growth and unlikely to lift interest rates before June at best.