Japan intervened in the currency market again Friday during New York trading to stem the yen's slide against the U.S. dollar, following its first such attempt last month to support the Japanese currency in 24 years, sources close to the matter said Saturday.
The country's currency surged by nearly 6 yen to 146.20 within hours Friday in New York, with the rapid swing fueling speculation that Japanese authorities conducted a yen-buying, dollar-selling market intervention for the second time.
Japan's top currency diplomat Masato Kanda kept silent on whether Tokyo had made a fresh intervention like the one last month.
Prime Minister Fumio Kishida, who is visiting Australia, told reporters later Saturday, "We are watching foreign exchange movements with a high sense of urgency. We will maintain our policy of responding appropriately to excessive fluctuations."
After the sudden surge, the Japanese currency eventually weakened against the dollar to 147.74-84 at 5 p.m. in New York, compared with 150.47-49 late Friday afternoon in Tokyo.
Before the intervention, market participants were cautiously testing the downside of the Japanese unit, pushing the dollar to 151.94 yen.
Based on the currency movements overnight, "a considerably large-scale intervention is believed to have been carried out," said Yuichi Kodama, chief economist at the Meiji Yasuda Research Institute.
But market participants say such efforts will only help slow the pace of the yen's slide. As long as the gap between U.S. and Japanese interest rates remains, the "trend is again likely to move toward a weakening yen," said Kodama.
The dollar drew buying as the 10-year U.S. Treasury yield maintained its upward tone after touching a new 14-year high on Thursday, following hawkish remarks from Federal Reserve Bank of Philadelphia President Patrick Harker.
Earlier Friday in London, the yen slid to the upper 151 zone against the dollar on the view that the U.S. Federal Reserve will continue with its aggressive interest rate hikes to tame rising inflation.
The yen last traded in the zone in July 1990, when Japan was in the final stages of its asset-inflated bubble economy.
Market analysts said caution about another intervention had limited the yen from falling sharply, though they saw the impact of the previous yen-buying, dollar-selling operation by authorities as short-lived, given the dynamics of currency markets.
Japan conducted a record 2.84 trillion yen ($19 billion) yen-buying, dollar-selling intervention on Sept. 22 to support its sagging currency, whose value sank by more than 20 percent from the beginning of this year.
Monetary authorities since repeatedly warned that they would again take necessary action against volatile yen fluctuations. Speculation had grown that authorities had already carried out "stealth" intervention to slow the yen's decline without making announcements.
The yen's slump to 32-year lows versus the dollar comes as a blow to Japanese households already hit by the rising cost of living. It inflates imported prices of energy, food and other raw materials for resource-scarce Japan, and the government plans to draw up an economic package to ease their pain and support the economy.
The primary driver of yen weakness against the dollar is the widening interest rate gap between Japan and the United States as their monetary policies differ.
Bank of Japan Governor Haruhiko Kuroda has ruled out raising interest rates in the next few years because its 2 percent inflation target will likely be achieved in a stable and sustainable fashion.
The U.S. Federal Reserve, for its part, is expected to go ahead with further rate hikes as inflation has been accelerating far faster than in Japan.
Finance Minister Shunichi Suzuki has said the United States showed a "certain degree of understanding" when Japan intervened in September.
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Yen briefly surges to 146 vs. dollar amid speculation of intervention
FOCUS: Analysts see more room for yen's fall as BOJ stands pat on policy
