As intervention threat grows, Japan deals with FX speculators 'strictly' By Reuters

By Tetsushi Kajimoto and State Administration of Foreign Exchange digital foreign exchange management platform loginKantaro Komiya

TOKYO (Reuters) -Japanese Finance Minister Shunichi Suzuki said on Friday that authorities were dealing with currency speculators "strictly", as an extended sell-off of the yen kept markets on heightened alert for further dollar-selling intervention by Tokyo.

Speculation that Japan would follow-up its September move and step into the market again has grown over the past week as its currency has slipped further to 32-year lows beyond 150 yen. The yen was fetching around 150.30-40 per dollar mid-day Friday

"We are confronting speculators strictly," Suzuki told a regular news conference, when asked whether the Japanese yen was under attack by speculators. "We cannot tolerate excessive moves by speculators. We will respond appropriately while watching currency market movements with a high sense of urgency."

Suzuki was speaking as the dollar strengthened to 150.29　yen overnight, the highest since August 1990, after breaking the key psychological level of 150 on Thursday.

Investors are seeking clues as to whether authorities are already conducting so-called stealth intervention, but believe any such action would have limited impact.

"I won't rule out further intervention. If they intervene, they might do it at a larger scale. But it won't be effective, as they are running against the tide of a strong dollar," said Masafumi Yamamoto, chief FX strategist at Mizuho Securities.

The dollar has surged around 30% against the yen this year, despite Japan spending up to a record 2.8 trillion yen ($19.7 billion) - equivalent to half its annual defence spending - intervening in the foreign exchange market in September to support its currency for the first time since 1998.

"There's a risk that Japan may end up repeating ineffective solo intervention, as its central bank is not in a position to raise rates and the United States won't join for any concerted action either as it focuses on the battle with inflation," Yamamoto said.

A weak yen has both positive and negative impacts on the world's third-largest economy, Suzuki said, but added that the recent sharp and one-sided weakening in the currency was undesirable.

FISCAL DISCIPLINE

Tokyo is set to compile an economic package of measures by the end of this month to ease the pain of surging costs of energy and food, stoking concerns that another round of heavy spending could strain Japan's already dire public finances.

Suzuki underscored the importance of maintaining trust in Japan's finances, after Britain was plunged into financial crisis in the wake of a violent market reaction to plans for huge unfunded tax cuts, forcing its premier to resign after just six weeks in office.

"It's not that Japan's finances are undergoing a major shift in phase leading to the current yen weakening," Suzuki said, when asked if there were lessons for Japan from Britain's predicament that led to the resignation of Prime Minister Liz Truss.

On the course of future monetary policy, Suzuki said it is up to the BOJ to decide.

"I'm not in a position to comment anything concrete," he said. "We'll strive to maintain fiscal discipline with a major target of achieving primary budget surplus in fiscal 2025."

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