(Bloomberg) — Japan’s Finance Minister Shunichi 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.
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“We discussed existing Group of Seven thinking on foreign exchange,” said Suzuki, speaking to reporters late Thursday in Washington D.C. “We’ll respond based on that agreement.”
TBS reported Friday afternoon that Suzuki discussed the possibility of coordinated currency intervention with Yellen, citing an unidentified Japanese government official. Following the report, the yen strengthened to as much as 127.94 against the dollar after hovering around the 128.60 mark around midday.
Suzuki declined to comment on whether the two spoke about market intervention to prop up the yen during his briefing. He said the talks focused more on the state of their economies than on concerns over currencies.
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 after the yen hit a two-decade low of 129.40 against the dollar earlier this week. The softness in the currency 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,” said Suzuki. “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 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.
Read more: A Trader’s Guide to Japanese Policy Makers’ Language on the Yen
The weakening yen is already causing some pain for consumers, as it worsens already high import costs that have been driven up by soaring commodity prices. To counter that impact, Prime Minister Fumio Kishida is set to unveil measures next week.
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.
While a growing number of economists expect the bank will take some form of action before the end of the year, the majority of economists surveyed by Bloomberg expect the BOJ to stand pat next week.
(Updates with TBS report)
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