Japan on Monday again warned of taking the necessary steps to counter excessive volatility in the currency market, with the yen's subsequent spike against the U.S. dollar sparking market speculation that Japanese monetary authorities intervened again.
The government did not confirm whether another yen-buying, dollar-selling intervention was carried out on Monday, only days after it stepped into the market by spending as much as 5.5 trillion yen ($37 billion) estimated by market sources, the largest ever.
Top currency diplomat Masato Kanda said authorities were ready to respond "appropriately" to excess volatility at any time, keeping financial markets on alert.
"We cannot tolerate excessive volatility caused by speculative moves, and we are ready to take necessary steps when needed," Finance Minister Shunichi Suzuki told reporters in the morning.
"We are in a situation where we are confronting speculative moves strictly," he said, adding that Japan was monitoring developments in the market with a high sense of vigilance.
The dollar, which had traded in the upper 149 yen level early Monday, plunged into the 145 yen zone in a matter of minutes, shortly after Suzuki's remarks.
The yen remains weak against the dollar, reflecting the widening interest rate gap between Japan and the United States.
The Japanese authorities intervened Friday during New York trading after the yen neared 152 against the dollar. It was the second intervention since Sept. 22, when Japan spent up to 2.84 trillion yen to shore up the currency.
Market intervention is seen as a last-resort move, and analysts say its impact could only be limited. Japanese officials have said the currency should move stably, reflecting economic and financial fundamentals.
After the yen's surge in the morning, it returned to around the levels it was trading before the suspected intervention.
"We refrain from commenting specifically on any currency intervention," Chief Cabinet Secretary Hirokazu Matsuno told a regular press briefing.
Rapid, one-sided yen fluctuations have raised the alarm among Japanese policymakers, who are seen as concerned about the speed at which the yen has been depreciating, not its specific levels.
The first market intervention on Sept. 22 was confirmed by the government, and Suzuki said the United States had shown a "certain degree of understanding" of the move.
Since then, financial markets have been on edge over further action amid talk of "stealth" intervention, but Japan has not confirmed whether it has carried out another intervention since the first round.
"We will take appropriate steps against excessive volatility 24 hours a day, 365 days a year," said Kanda, vice finance minister for international affairs.
Japan's foreign reserves stood at $1.24 trillion at the end of September, consisting of foreign securities, deposits and gold, among others. The nation can conduct yen-buying operations by tapping the reserves.
The Bank of Japan is scheduled to hold a two-day policy meeting from Thursday, at which its Policy Board is widely expected to maintain its ultralow rate policy.
U.S. President Joe Biden, heading into midterm elections next month, has said he is not concerned about the strength of the U.S. dollar. The world's largest economy has seen inflation accelerating at its fastest pace in decades.
Unlike Japan, hit by cost-push inflation caused by surging import costs, price hikes have been supported by strong domestic demand in the United States.
BOJ Governor Haruhiko Kuroda has said monetary easing is necessary for the fragile economic recovery.
"At this point, wage growth is slower than the inflation rate (in Japan), and real income has been falling, which is extremely undesirable," Kuroda told a Budget Committee session in the House of Councillors on Monday.
"We will make our utmost efforts to firmly support the economic recovery from the COVID-19 pandemic and achieve the 2 percent price stability target accompanied by wage increases," the governor said.
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