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Yen eases after intervention comments by Japan's Aso
[TOKYO] The yen eased Tuesday after Japan's finance minister reiterated that officials could still intervene in forex markets to stem the unit's steep rise, but analysts warned such a move could trigger a currency war in Asia.
Since the start of April the Japanese unit has soared about four percent to 17-month highs against the dollar as concerns about a global economic slowdown push traders into safe-haven assets.
Finance Minister Taro Aso said the country's leaders were ready to take action as needed if there were extreme movements in the foreign exchange market, Bloomberg News reported.
In afternoon trade the dollar rose to 108.35 yen from 107.94 yen Monday in New York.
Mr Aso's comments follow similar announcements last week from himself and the government's top spokesman.
They appeared to contradict Prime Minister Shinzo Abe, who on Wednesday pledged to avoid "arbitrary" intervention in markets.
But since then, Japanese officials have tried to qualify Mr Abe's remarks, saying moves to halt the currency's "one-sided, speculative" rally would not breach the G20's agreement to avoid competitive currency devaluations.
"The Abe government faces increasing pressure to act, since the rising yen threatens the record-high corporate profits of recent years, perhaps Abenomics's main achievement," Tobias Harris, a vice president at Teneo Intelligence, said of Mr Abe's bid to kickstart the Japanese economy.
Authorities would most likely have to rely on using policy tools such as monetary and fiscal stimulus to stem the yen's rise, Harris added and warned on the use of an intervention.
"Since unilateral Japanese intervention (in markets) would widely be viewed as illegitimate, it could trigger a currency war within Asia, as both China and South Korea would react negatively to a massive campaign of intervention by Japan." In other trading, the euro ticked up to US$1.1411 and 123.66 yen from US$1.1406 and 123.13 yen in US trade.