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BoJ hints at intervention after FX speculation

May 21, 2012

Japan’s finance minister Jun Azumi on Friday stepped up his warnings over the yen’s strength, describing the currency’s climb after the release of disappointing US mid-Atlantic manufacturing data on Thursday as “volatile” (the yen made its biggest single-day jump in more than a year against the US dollar, hitting a 3-month high of ¥79.13), adding “there was a sudden rise in the yen last night that is attributable to some speculators who are over-reacting.” “We are watching currencies with a heightened sense of caution and are prepared to respond as appropriate,” Azumi said in a veiled threat of yen-selling intervention.

Separately, Japan’s government raised its economic assessment for the first time in nine months, lifting its evaluation of consumer spending, exports, corporate profits and employment. “The Japanese economy is on the way to recovery at a moderate pace, reflecting emerging demand for reconstruction, while difficulties continue to prevail,” the Cabinet Office noted in its monthly report. Nonetheless, the government sees downside risks stemming from sharp fluctuations in the financial markets, and overseas economic slowdown. The government lowered its evaluation of China’s economy for the first time in three months, saying that growth is moderating in Japan’s largest trading partner.