Japan will take “bold action” to stem currency volatility if needed, issuing its clearest warning yet of possible intervention after the yen touched a 32-year-low.

Excessive currency moves have negative effects on the economy and the country is ready to take action if they continue, chief currency official Masato Kanda said late Friday in Washington. The current situation is increasing the chances that Japan will have to take “necessary steps” again, he added, declining to comment on the specifics of possible actions.

“We will take appropriate steps against excessive moves especially if that’s led by speculative trading,” Kanda said. “If we judge that currency moves are excessive and if that takes place repeatedly, we are always prepared to take bold action.”

Kanda’s warning comes after a statement by Finance Minister Shunichi Suzuki said Japan is “deeply concerned” about rapidly increasing volatility in FX markets. The yen has “seen unprecedentedly sharp and one-sided movements, with speculative activities behind such moves,” according to the earlier statement.

The yen touched a low of 148.86 versus the dollar Friday, the weakest level since August 1990, before ending the session at 148.67. Whiplash moves earlier in the day sparked market chatter of potential intervention by Japanese authorities. A finance ministry official declined to comment on whether the country had stepped into markets again.

While exchange rates should be determined by markets in principle, excessive volatility or disorderly movements can have adverse implications for economic and financial stability, according to the statement signed by Suzuki.

“The international community needs to pay close attention to the impact of recent exchange-rate movements on inflation, capital flows, and debt problems, and to address these problems appropriately,” the statement said.

Source:
courtesy of BLOOMBERG

by Toru Fujioka

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