Fujii Says Japan Will Act If Yen Moves in ‘Biased Direction’

Japanese Finance Minister Hirohisa Fujii said the government will intervene if the yen shifts in a “biased direction.”

“If currencies show some excessive moves in a biased direction, we will take action,” Fujii told reporters after meeting counterparts and central bankers from the Group of Seven in Istanbul today. He declined to comment on whether the yen is moving in such a way.

The yen rose to an eight-month high of 88.24 against the dollar this week after Fujii said he opposed currency intervention in principle, spurring speculation the government wouldn’t step into the foreign exchange market. The 77-year old minister later revised those comments, saying he wasn’t an advocate of a strong currency and that Japan was open to intervention should the currency market move “abnormally.”

Fujii today said his comments about the yen “have been a bit misunderstood.” The minister said he faced no criticism from other G-7 officials at today’s meeting.

“Fujii’s comments have become more flexible as he adapts them to current circumstances,” Makoto Utsumi, who led Japan’s currency policy from 1989 to 1991 as deputy finance minister for international affairs, said in an interview this week. “What’s been made clear is that Japan won’t conduct massive intervention” to keep the yen at certain levels, he said.
‘Complicated Reasons’

Japan hasn’t entered the foreign exchange market since the central bank, at the request of the Finance Ministry, sold a record 14.8 trillion yen ($164 billion) in the first quarter of 2004 to restrain the currency’s gains.

Fujii today reiterated that stable currencies are important for global economic growth and they should be set by economies’ fundamentals. The minister said there are “complicated reasons” behind the yen’s strength.

The yen’s appreciation threatens to undermine Japan’s export-driven economic recovery as the jobless rate hovers near a record and deflation continues.

Japan’s large manufacturers expect the yen to trade at 94.50 per dollar in the year ending March 31, the Bank of Japan’s quarterly Tankan survey showed this week. The Japanese currency traded at 89.80 per dollar in late New York trading yesterday.

Fujii also said the government has no plans to provide additional stimulus spending, though he added the world’s second-largest economy is still in a “severe” state.

- Via Bloomberg

I'd be pissed if I lived in Japan. Get in the streets and show your disapproval.