Former Japanese foreign exchange minister: Japan may not intervene in yen decline

As the yen continued to depreciate to the 150 mark, Japan's former foreign exchange minister said that Japan may not intervene in the currency market to reverse the yen's decline.

Naoyuki Shinohara, Japan's former foreign exchange minister, said Japan may not seek to intervene in currency markets to reverse the yen's decline because the recent decline reflects economic fundamentals.

Mr. Shinohara said there was no rule or consensus among the Group of Seven leading industrialised nations about what was defined as "excessive volatility".

"But usually, when you talk about excessive volatility, you think about a time frame of days or weeks," not months, he said in an interview on Friday.

The comments contrasted sharply with comments by Masato Kanda, now Japan's top foreign exchange diplomat, who said on Wednesday that the yen's prolonged decline might also require intervention.

"The Japanese authorities are well aware that they cannot reverse market trends when the yen depreciation is driven by economic fundamentals," said Mr. Shinohara, who maintains close ties with current policymakers.

"The yen has been falling steadily for a long time, usually driven by fundamentals," he said of the yen's recent decline.

The major economies of the Group of Seven (G7) and Group of 20 (G20) have a consensus that exchange rate movements should reflect economic fundamentals and that excessive volatility is undesirable. Japan has used this agreement for its past entryforeign exchange marketThe action is defended.

The Japanese government is facing fresh pressure to combat the continued depreciation of the yen as investors focus on the prospect of higher US interest rates for a longer period of time, while the Bank of Japan remains committed to its ultra-low interest rate policy.

Markets are wary of the possibility of Tokyo stepping in to boost the yen, which last week briefly breached Y150 against the dollar, a level traders see as a floor for intervention.

"If the recent weakness of the yen is indeed a source of concern for Japan, then the best way for the BoJ to respond is to normalise its ultra-loose monetary policy," Mr. Shinohara said.

"The Ministry of Finance should focus on dealing with sudden movements in the yen that are not in line with the general trend," he said.

In Japan, the Ministry of Finance has jurisdiction over exchange rate policy and decides whether and when to intervene. The Bank of Japan executes the order as the Ministry's agent.

The last time the Japanese government intervened to buy yen was in September and October last year, when the yen finally fell to a 32-year low of Y151.94 to the dollar.

Shinohara served as Japan's deputy finance minister for international affairs until 2009, and then as vice president of the international monetary fund (IMF) until 2015.