By Tetsushi Kajimoto

TOKYO (Reuters) -Japan will carefully watch foreign money market strikes and reply “appropriately” as wanted, the nation’s high foreign money diplomat mentioned on Tuesday after high monetary authorities met in response to a weakening within the yen to a six-month low versus the greenback.

“Forex charges ought to transfer stably reflecting fundamentals and extreme volatility is undesirable,” Masato Kanda, vice finance minister for worldwide affairs, informed reporters after a gathering along with his counterparts from the Financial institution of Japan and the nation’s monetary watchdog.

“We are going to carefully watch foreign money market strikes and reply appropriately as wanted,” he mentioned. “If vital we can’t rule out each possibility accessible,” he mentioned when requested about the potential of foreign money intervention.

The routine three-party talks had been held to sign the authorities’ dedication to maintain market strikes in test significantly when volatility is excessive. Such talks had been final held in mid March and have a tendency to happen when the yen suffers sharp swings, both up or down.

Referring to new Governor Kazuo Ueda, Kanda mentioned the federal government and the BOJ had carefully coordinated with one another to date, and confirmed their will to work much more carefully collectively underneath the BOJ’s new management in responding to varied dangers to markets.

“There are threat elements in monetary markets such because the U.S. debt ceiling and its monetary sector. The federal government and the BOJ shared the necessity to carefully watch foreign money and monetary market strikes and their impression on Japan’s financial system,” he mentioned.

YEN WEAKNESS

The three-way talks had been used final yr to warn towards extreme weakening of the Japanese foreign money, which drives up import prices and offers a blow to non-public consumption that makes up greater than half the financial system, the world’s third largest.

The assembly final yr served as a prelude to Japan’s first dollar-selling and yen-buying intervention in 24 years, because the yen depreciated to a close to 32-year low towards the U.S. foreign money.

Often, a powerful yen tends to be a matter of concern for policymakers, because of the export-reliant nature of the Japanese financial system, as this might undermine export-price competitiveness.

Just lately yen weak spot has been a higher concern.

A weak yen has pushed up import payments, sending Japan’s commerce steadiness into persistent deficit and undermining Japan’s buying energy.

There have been latest considerations a couple of renewed weakening within the yen, which has hovered near a six-month low past 140 yen to the greenback since final Friday.

On Tuesday, the dollar dropped 0.03% towards the yen on Tuesday to 140.4, slightly below the yr’s excessive of 140.91 hit on Monday.

Serving to enhance the greenback, longer-dated U.S. Treasuries rallied on Tuesday as bond merchants welcomed a deal to droop Washington’s borrowing restrict till January 2025 in trade for caps on spending and cuts in authorities programmes.