Japan finance ministry warns against yen gains, seeks FX stability

[TOKYO] Japan's finance minister Taro Aso warned on Friday against recent yen gains and highlighted the importance of exchange rate stability, after a surge in the Japanese currency threatened to hurt the country's export competitiveness.

Japanese authorities tend to verbally intervene in markets to prevent investors from driving up the yen during times of increasing strains in overseas economies. The yen and the Swiss franc are perceived as safe-haven currencies and tend to be bought when markets grow jittery.

Mr Aso told reporters after a cabinet meeting that he would not comment on currency levels, while noting that the yen had swung by 2 yen in the past week.

"I think it will have various impacts. At least, currency stability is extremely important. We need to pay close attention to the market," he said.

The Japanese currency hit a more-than-one month high against the dollar on Friday after US President Donald Trump broke a temporary truce in the Sino-US trade war, sending shockwaves through global financial markets.

Mr Trump said he would impose an additional 10 per cent tariff on US$300 billion worth of Chinese imports on Sept 1 after US negotiators returned from trade talks in Shanghai.

"This will surely affect China's economy, which I think will have various impacts on the global economy," Mr Aso said.

"There's already a move among companies to shift factories out of China. It's developing into not just trade war but various other things, so it warrants careful attention."

Japan has stayed out of the currency market since 2011 when it heavily intervened to stem the yen's strength in the wake of the Fukushima nuclear disaster.

Japan has stuck to the G-7/G-20 agreement against competitive devaluation, with a pledge to promote market-oriented exchange rates and use monetary policy to achieve domestic objectives without targeting currencies.

REUTERS