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Japan govt, c.bank voice concern over sharp yen fall

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SINGAPORE — Japan’s government and the central bank are “concerned” about recent sharp yen declines and stand ready to respond as needed on currency policy, they said in a rare joint statement on Friday.

The Bank of Japan’s commitment to super low interest rates has weighed on the yen, driving it down 15% against the U.S. dollar since early March to a 20-yr low of 134.55 this week.

COMMENTS: ADAM COLE, CHIEF CURRENCY STRATEGIST, RBC CAPITAL MARKETS, LONDON “Generally if you look back at BOJ behavior, if they say they will take appropriate action that is seen as the top level of intervention they go through before physical intervention. So, they have gone as far as they can go for now.

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“I do think it’s a step up in their intervention and should be a lid on dollar/yen in the short-term. In the long-term, there’s little that they can do as it flies in the face of the policy stance.

“For now it will be hard for dollar/yen to make further progress while that threat (intervention) hangs, but ultimately we are bullish dollar/yen.” GAO QI, ASIA FX STRATEGIST AT SCOTIABANK, SINGAPORE “Recent rapid depreciation in the Japanese yen… has raised some concern among Japanese regulators.

“Markets are worried about US CPI inflation… possibly they intended to make preparations for higher US CPI inflation. We’re not very sure about that but possibly it’s their purpose to stabilize market expectations before the US publishes May CPI inflation this evening.

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“I think it’s not that strong compared to previous wording they’ve used. … it’s still relatively neutral or soft. I think from the wording, it doesn’t show any imminent possibility of direct intervention, they say they’re just concerned.” MOH SIONG SIM, CURRENCY STRATEGIST BANK OF SINGAPORE, SINGAPORE “It’s getting a lot of attention both domestically and internationally, but I’m not sure whether it would amount to any concrete action, we’ve seen this verbal intervention before.

“What can potentially slow the pace of depreciation is a change in policy but right now it looks like there is no indication that the Bank of Japan is concerned about inflation or the impact of the weak yen on that. It’s more of a verbal intervention and I’m not sure whether it will amount to any action and won’t have any impact on the yen.

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“The market is wary about intervention, but the bar for intervention is very high and what drives the yen remains unchanged, which is the policy divergence between a hawkish Fed and a dovish Bank of Japan, and that remains valid.”

ATSUSHI TAKEDA, CHIEF ECONOMIST, ITOCHU ECONOMIC RESEARCH INSTITUTE, TOKYO “Theoretically, Tokyo can intervene solo. But the question is whether doing so would be effective. If you get the timing right, it could be effective. But if it’s not, you can never resort to this tool. That’s why authorities will probably be very cautious about intervening. They won’t intervene unless it becomes absolutely necessary.

“Tokyo could intervene if the yen slides below 135 to the dollar and starts going into a free fall. That’s when Tokyo really needs to step in. But Washington won’t join so it will be solo intervention. For the United States, there’s really no merit in joining Tokyo on intervention.”

MASAHIRO ICHIKAWA, CHIEF MARKET STRATEGIST, SUMITOMO MITSUI DS ASSET MANAGEMENT, TOKYO “It was probably a slightly toned-up jawboning because the pace of the yen’s fall has been rapid the past week. I don’t think Tokyo will conduct yen-buying intervention because that requires consent from the United States. There’s a good chance the yen may fall further depending on U.S. consumer inflation data and the FOMC.” (Reporting by Kantaro Komiya in Tokyo, Andrew Galbraith in Shanghai and Alun John in Hong Kong, Dhara Ranasinghe in London Editing by Toby Chopra)

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