Japan officials step up campaign against yen rise

Japan policymakers fired off a volley of comments on Thursday to curb yen strength and the central bank checked rates with banks as officials stepped up efforts to prevent the currency from harming a fragile economic recovery.
Finance Minister Yoshihiko Noda said, however, Group of Seven countries have no plans to hold a conference call about currencies, sparking a brief yen rally as traders interpreted the remarks to mean currency intervention was unlikely for now.
The yen has risen steadily against the dollar from around 95 yen in early May to a 15-year high on Wednesday of 84.72 yen, prompting currency markets to speculate that authorities might intervene.
The dollar was trading at 85.35 yen on Thursday.
Government officials have shown increasing alarm in recent weeks at the yen's rise against the dollar. On Thursday, both the finance minister and central bank governor Masaaki Shirakawa issued comments simultaneously.
Shirakawa said currency and stock markets are showing big fluctuations caused by uncertainty over the U.S. economic outlook.
"The BOJ will closely watch market fluctuations and their impact on the Japanese economy," he said in a statement.
Earlier, market sources said the BOJ had asked banks for dollar/yen exchange rates saying it wanted to do a trade, a step beyond its usual contact. But it did not conduct any transactions, they said.  A senior BOJ official later confirmed it had conducted the checks as a part of its vigilance on markets.
Many traders said intervention was unlikely for now.
The market sees a monetary policy response from the BOJ as more likely than currency intervention, but that would only come if the yen were to rise at a pace of 2-3 yen per day towards its 1995 record high of 79.75 per dollar, analysts say.
"Whether Japan will intervene depends on how much global shares and U.S. bond yields will fall. But if the dollar falls to around 82-83 yen, the chance of intervention will rise," said Masafumi Yamamoto, chief FX strategist at Barclays Capital.
Behind policymakers' rhetoric is concern that a stronger yen could threaten Japan's exporters and derail a feeble recovery from the global crisis.
Prime Minister Naoto Kan decried the yen rise as "rough", Jiji news agency reported.
Rintaro Tamaki, the finance ministry's top foreign exchange official, said he had discussed the financial markets' situation with a Bank of Japan official in charge of international affairs.
Japan's authorities haven't intervened since March 2004, when a 15-month long yen selling spree came to an end. During that period, they sold 35 trln yen to try to stop a rising yen from harming all-important exports and to fight deflation.
Even a rare G7 statement between meetings in October 2008, which singled out yen volatility and was seen as giving Japan approval to intervene, did not tempt Tokyo to step in.