Japan’s top currency official said on Wednesday that his country’s weakening economy was suffering from a strong yen and signalled that Tokyo may intervene “decisively” to combat it.
“Exports have been influenced by supply chain changes and problems in Europe, some advanced economies and also in China. And we are also suffering from a very appreciated yen,” Takehiko Nakao, vice finance minister for international affairs, said in a speech in London.
“If needed we will take very decisive action in the market, that is our stance.”
Japanese authorities have stayed out of the currency market since their last intervention in November. But they have resumed issuing verbal threats recently on concerns that a stronger yen could derail the export-dependent economy’s recovery from last year’s earthquake and tsunami.
Tokyo spent a record ¥8-trillion ($102-billion U.S.) in unilateral intervention in the currency market on Oct. 31 2011, when the dollar hit a record low of ¥75.31, and another ¥1-trillion in November on undeclared forays into the market.
The dollar was at ¥78.51 on Wednesday.
Japan’s economic growth rate slowed to 0.3 per cent in April-June as Europe’s debt crisis weighed on global demand, and economists have trimmed their forecasts for the second half of the year.
Underlining doubt over prospects for Japan’s export-led recovery, July trade data showed the sharpest drop in exports since January, in line with trends in other export-driven economies in Asia.
Mr. Nakao also urged the European Central Bank will make good on a pledge to buy stressed European sovereign debt.
“I hope that the ECB does what Mr. (Mario) Draghi has promised,” he said, adding he had met recently with senior euro zone monetary policy makers.
Mr. Draghi, the ECB president, promised last month to do “whatever it takes” to protect the euro and said earlier in August the central bank would act to shore up the region’s debt markets.
He reiterated the message on Wednesday.
Markets widely expect the bank to flesh out its strategy for buying Spanish and Italian government bonds at its policy meeting next Thursday.Report Typo/Error