Noda said he was watching currency moves with “utmost interest” but declined to comment on intervention, which is seen unlikely unless the yen strengthens much further beyond the 15-year high hit against the dollar last week. “I can’t comment on what is being discussed, but we are communicating with each other,” Noda told reporters when asked whether finance ministry officials were talking with their G7 counterparts about currencies.
Noda’s remarks underscored Tokyo’s growing unease about the yen’s strength, but currency strategists were skeptical whether it could persuade its G7 partners to act together. “The news that Japan is in contact with the G7 countries shows a stronger sense of urgency, but it doesn’t automatically mean the contact will lead to coordinated intervention, which is fairly unlikely at this point,” said Masafumi Yamamoto, chief FX strategist Japan for Barclays Capital.
A strong yen is putting additional pressure on Japan’s fragile economy, prompting the government to consider drafting a package of stimulus measures and ratcheting up pressure on the central bank to come up with its own steps. The stimulus will include subsidies for Japanese factories producing clean-energy and energy-efficient goods such as lithium battery cells for electric vehicles, the Nikkei newspaper reported on Friday.
Japan would be the first developed nation to turn to additional spending since the global financial crisis, but its public debt worth nearly twice the economy’s annual output limits Tokyo’s options and any new steps are expected to be modest.
Markets have been speculating that the Bank of Japan may try to pre-empt government pressure for action and further loosen its already ultra-easy monetary policy at an emergency meeting before or shortly after an expected meeting between BOJ Governor Masaaki Shirakawa and Prime Minister Naoto Kan next week.
However, sources familiar with the BOJ’s thinking told Reuters the central bank was unlikely to act before its scheduled Sept. 6-7 meeting, unless the yen heads towards its all-time high past 80 to the dollar at a pace of 2 to 3 yen per day.
