Japan is ready to respond "resolutely" to volatile yen movements, Finance Minister Shunichi Suzuki warned Monday, but the currency weakened to breach the key 145 mark versus the U.S. dollar, a level unseen since the country's market intervention in late September.
Japan's record 2.84 trillion yen ($19 billion) intervention to support the yen on Sept. 22 served as "a warning" to speculators who were behind the currency's recent rapid, one-sided movements, Suzuki said, adding the government is watching developments "with a sense of heightened vigilance."
Market analysts say the effect of the yen-buying, dollar-selling intervention should be short-lived as the dollar is broadly strong amid the prospect of further interest rate hikes by the Federal Reserve.
The yen slid past 145 relative to the dollar, even after Suzuki's warning on Monday. But caution about another intervention by Japanese authorities has also prevented the yen from dropping well beyond that psychologically important level.
"Speculators were behind the rapid, one-sided movements. We carried out intervention the other day and we have been saying that we will take action resolutely if needed," Suzuki said at a press conference. "There is no doubt that this has served as a warning to speculators."
Higher import costs for energy and raw materials are a headwind for resource-scarce Japan, with the yen's slump to its lowest level in 24 years amplifying the impact.
"It's important that currency movements are stable, so rapid and one-sided ones are undesirable," Suzuki said.
The yen's weakening trend reflects the widening interest rate gap as the monetary policies of Japan and the United States have been diverging.
The Bank of Japan remains committed to keeping its ultralow rate policy despite the nation's key inflation gauge topping the central bank's 2 percent target in the short term. The BOJ has said it believes that the current inflationary pressure will not last.
BOJ board members said the bank should explain carefully the need to maintain its monetary easing, while one of them noted that foreign exchange rates are not the target of its policy, according to a summary of opinions expressed at a Sept. 21-22 policy meeting.
At a press conference after the meeting, BOJ Governor Haruhiko Kuroda ruled out a rate hike in the next few years, accelerating the yen's fall beyond 145 to a point where Japanese authorities had to step in.