The Japanese Finance Minister, Shunichi Suzuki, stated on Friday that the recent dips in the value of the yen were the result of “speculative” activities. He implied that authorities were prepared to intervene in the market to stop any extreme declines in the value of the currency.

Suzuki added that officials were keeping an eye on the yen’s movements, not its levels. He restated Tokyo’s recent cautions that any action taken by the authorities in response to chaotic currency movements would not be ruled out.

“Given how the yen’s declines are continuing despite the interest rate gap narrowing, albeit modestly, suggest that there are speculative moves in the market,” Suzuki told parliament.

“It’s important for currency rates to move stably, reflecting fundamentals. Excessive volatility is undesirable, and we are watching market moves from this perspective,” he said.

Analysts claim traders are using the BOJ’s policy rate, which is still hovering around zero, as a justification to keep selling yen due to assumptions that the difference between US and Japanese interest rates would stay large.

Since the Bank of Japan decided last week to cease eight years of negative interest rates and scale back its aggressive stimulus programme, the yen has been declining.

This week, the Japanese yen fell to a 34-year low vs the US dollar at 151.975, as investors read the BOJ’s dovish advice as a sign that rate hikes would be gradual going forward. It recovered some of its losses and closed Friday at 151.35.

In the past, Japanese policymakers have supported a weaker yen because it increases earnings for the nation’s large manufacturers.

But recent significant falls in the value of the yen have made matters worse for Tokyo by raising the price of imported raw materials, which has a negative impact on retail earnings and consumption.

(Adapted from CNBC.com)

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