Japan ready to take action as yen surges, says Aso

Japanese authorities voiced growing concern at the yen’s surge as the UK voted to leave the European Union, with Finance Minister Taro Aso saying he’s ready to act in markets if needed.

“We are very concerned about the risks this will have on the world economy, finance, currency markets and other areas,” Mr Aso told reporters in Tokyo, after the yen gained to as high as 99.02 per dollar. “In the foreign exchange market, we are seeing some very nervous moves, and so that these kinds of moves don’t continue, we are watching it with a sense of concern that is higher than before, and we will respond properly if needed.”

Mr Aso declined to comment on potential unilateral intervention or coordinated action with Group of Seven counterparts.

After four consecutive years of declines, the yen has advanced 17 per cent this year against the greenback in the best performance among developed nations, amid concern a Brexit would drag down already-tepid global growth. The yen gained at the start of the year on speculation China and the US will struggle to overcome headwinds.

Powered by unprecedented central bank easing, the yen reached a 13-year low of 125.86 in June of last year. Its strength since then comes despite Bank of Japan Governor Haruhiko Kuroda and his board’s surprise introduction of a negative deposit rate in January. Bloomberg View columnist Mohamed El-Erian has called the exchange rate “a total nightmare” for BOJ policy makers, and is “too strong” for the Japanese economy.

The strong yen cuts corporate profits for large Japanese companies, in turn weakening business investment and the prospects for wage gains and consumer spending.

The yen’s appreciation works against Mr Kuroda’s efforts to achieve his 2 per cent inflation target by lowering the price of imported goods. BLOOMBERG