Japan’s new verbal intervention strategy: keep mum
TOKYO, June 8 — Japan's Finance Minister Jun Azumi seems to have adopted a new form of verbal intervention to rein in the high-flying yen: keep quiet.
Currency traders took note of the sudden silence and some speculated that Tokyo may have decided it was a better way of keeping markets on edge after they have grown too accustomed to regular verbal jawboning.
Only last week, when the yen's rise gained pace, Azumi was still following the usual script repeating the mantra that Japan would “respond decisively” to “one-sided market moves.”
And then he went silent.
Since the yen spiked late today after disappointing US jobs data, Azumi and his deputy in charge of currency market have repeatedly responded to questions about currencies with a curt “no comment.”
Azumi declined to comment about currencies at a press conference earlier on Friday, as he as done all this week.
“Azumi has been in office for a while now and he's been tweaking his rhetoric to keep markets on tenterhooks,” said a senior spot trader a major Japanese bank who declined to be identified.
With the yen trading at around 79.30 to the dollar on Friday, below a 3-1/2 month high of 77.65 yen hit on June 1, markets saw less of an immediate threat of intervention.
“Unless we again dip below the 78 yen line people won't worry about the intervention. They know Azumi faces international pressure every time Japan steps in and has to have a really good reason to do so.”
But officials familiar with currency policy made clear stepping into the market still remains an option.
“There's a shared feeling (among Japanese policymakers) that a strong yen, while it may reflect the relative strength of Japan's economy, hurts business sentiment via declines in share prices, and thus action in the market should not be ruled out,” a source with direct knowledge of currency policy said.
Azumi told his Group of Seven peers in a conference call on Tuesday to discuss Europe's sovereign debt crisis that a rising yen poses risks to the economy, but he declined to comment on whether he told G7 members that Japan is prepared to intervene.
Japan knows the basic stance of Europe and the United States is that with the yen being such a big market, there's no point intervening and that such action is undesirable.
But given the yen is rising due to risk aversion driven by problems in Europe, it feels that intervention will be justified regardless of whether such action gets the nod of the United States and Europe.
The G7 intervened jointly in March 2011 to counter a rapid yen rise just days after the nation was struck by a massive earthquake and a deadly tsunami.
But after that rare act of solidarity, Japan has struggled to win the group's understanding for its efforts to curb the yen's climb that largely reflected market strains caused by the euro zone crisis and US monetary policy. — Reuters