TOKYO (MNI) – Japanese Vice Minister of Finance for International
Affairs Takehiko Nakao on Friday reiterated Tokyo’s commitment to take
“decisive” action in the currency market, warning that the recent
appreciation of the yen has been excessive.

“The G7 countries have an agreement that abrupt and excessive price
movements in the FX market is not desirable,” Nakao said in a keynote
speech at the Japan Forex Forum hosted by Euromoney. “I myself am also
concerned about (the recent) excessive movement of the yen.”

Nakao said that the recent appreciation of the yen has been “led
mainly by speculative factors” as the euro has plunged on growing
concerns about the debt crisis and banking problems in Europe. The yen
has also risen against the dollar, attracting safe-haven flows.

Nakao, who oversees currency market intervention at the MOF, also
said that although the Japanese economy is now recovering steadily from
last year’s earthquake disaster, excessive appreciation of the yen will
hurt business sentiment.

“So we will closely monitor developments in the FX markets and take
decisive action if the excessive price development continues,” Nakao
said.

MOF data have shown Japan did not intervene in the currency market
between January and May, after having spent Y9.09 trillion on selling
yen for the U.S. currency in the final quarter of 2011.

Tokyo intervened in the foreign exchange market on Oct. 31, when
the yen hit a life-time high of Y75.32 versus the dollar, and conducted
further yen-selling operations from Nov. 1 to Nov. 4.

The dollar was quoted below Y79 in Asian trading on Friday while
the euro stood below Y97 after falling to an over 11-year low of Y96.48
overnight.

Nakao said Japan will continue to support the European Union and
International Monetary Fund in their efforts to contain the sovereign
debt crisis in the eurozone.

“Europe faces important challenges now but it is also making a lot
of efforts” in countering the challenges, he added.

Referring to the budget and fiscal deficit problems which triggered
the system-wide sovereign crisis in Europe, Nakao also warned of the
hidden risk in Japan.

“We can’t cover the budged deficit by issuing government bonds
perpetually,” he said. Prime Minister Yoshihiko Noda is struggling to
win enough support from his own ruling party and opposition parties for
enacting bills for a sales tax hike during the current Diet session
ending on June 21.

tokyo@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4833 **

[TOPICS: M$A$$$,M$J$$$,MGJ$$$,MT$$$$,M$$FX$]