“We discussed existing Group of Seven thinking on foreign exchange,” said Japan’s Finance Minister Shunichi Suzuki, speaking to reporters late Thursday in Washington D.C. “We’ll respond based on that agreement.”
Suzuki said he discussed recent abrupt moves in the yen with U.S. Treasury Secretary Janet Yellen, and the two agreed to uphold existing foreign exchange rate agreements.
Suzuki said he showed Yellen how recent moves in the yen have been very sudden, though he added that talks focused more on the state of their economies than on concerns over currencies.
The reaffirmation of the G-7 agreements and Suzuki’s remark that the talks didn’t center on currency concerns suggest Japan didn’t use the opportunity to push for tacit approval for possible currency intervention. Standing G-7 agreements state that foreign exchange rates should be decided by the market, although excessive moves can have a negative impact.
The talks come with the yen close to a two-decade low of 129.40 against the dollar set on Wednesday. The weakness largely stems from the sharp policy divergence between Japan and the U.S. While the Federal Reserve is looking set to accelerate its rate hikes, the Bank of Japan is keeping yields at rock-bottom levels.
The weaker yen is amplifying the impact of soaring commodity prices that are squeezing corporate profits and household budgets.
Suzuki indicated his continued concern over the recent moves: “The government has historically said that sudden moves aren’t desirable. But we’re now seeing sudden moves, and we have to watch the situation carefully with a sense of urgency.”
The yen softened a touch after the remarks and was around 128.6 per dollar yesterday mid-morning in Tokyo from 128.26 just before Suzuki spoke.
Verbal interventions from Suzuki still have some way to go before they get to the level where actual intervention in the market seems imminent. Japanese finance ministers typically say the government is ready to take decisive action to counter excessive moves before an actual intervention takes place.
The BOJ’s policy meeting next week is also under close scrutiny, as speculation mounts that the central bank may have to start addressing the negative impacts from the weaker yen.
Suzuki declined to comment on the possibility of direct intervention in the currency market to prop up the yen.
