Japan and the United States agreed Tuesday to closely communicate on currency movements, a senior Finance Ministry official said a day after the yen tumbled to its lowest level against the U.S. dollar in more than six years.

In a meeting in Tokyo, Masato Kanda, vice finance minister for international affairs, and Andy Baukol, acting Treasury undersecretary for international affairs, also affirmed close coordination in enforcing financial sanctions against Russia for its invasion of Ukraine.

Masato Kanda, vice finance minister for international affairs, speaks to reporters at the Finance Ministry in Tokyo on March 29, 2022. (Kyodo)

Kanda said he and Baukol took "a fair amount of time" to discuss the movements in the currency market, where the dollar on Monday surged above the 125 yen threshold for the first time since August 2015. On Tuesday, the dollar took a breather and moved mostly in the upper 123 yen range.

In an apparent warning over the yen's recent rapid depreciation, Kanda said the two shared recognition among finance ministers and central bank governors of the Group of Seven and the Group of 20 that "excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability."

Asked about whether the discussion included the possibility of intervening in the currency market, Kanda declined to share details of the talks.

The recent depreciation of the yen is partly due to a divergent monetary policy path between Japan and the United States.

Japan's relatively slow economic recovery and low inflation have bolstered the case for the Bank of Japan to keep its monetary easing for an extended period, in sharp contrast to the U.S. Federal Reserve, which has entered a rate hike cycle to fight inflation.

The yen's drop accelerated on Monday, with the BOJ's announcement of stepping into the bond markets to keep 10-year Japanese government bond yields from rising above its implicit upper limit. The emergency bond-buying operation will continue until Thursday.

The BOJ's policies "do not conflict at all" with those of the government, which started to craft a new stimulus package to soften the impact of rising energy and other commodity prices, with close communications held between the two, Kanda said.

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