Tokyo, April 10

Japan’s top government spokesman said the Group of 20 (G20)’s agreement to avoid competitive currency devaluation does not mean Japan cannot intervene in response to one-sided currency moves.

The Bank of Japan (BoJ) and the government are tensely watching currency markets and the government is prepared to take appropriate steps as needed, Chief Cabinet Secretary Yoshihide Suga told Reuters, but declined to comment on what steps the government was considering.

Japanese Prime Minister Shinzo Abe’s comment to the Wall Street Journal last week that countries should avoid ‘arbitrary intervention’, was misunderstood and does not rule out intervention for Japan, Suga said.

“What the G20 is talking about is arbitrary intervention, which is different from responding to a one-sided move,” Suga told Reuters in an interview on Saturday.

“The prime minister’s comments were based on the G20 understanding that long-term manipulation of currencies is undesirable.”

The dollar hit a fresh 17-month low versus the yen last week on expectations that the US Federal Reserve will raise interest rates very slowly.

The yen has gained more than 10 per cent against the dollar this year, as the investors seek the currency as a safe haven.

A rising yen tends to worry government officials because it decreases exporters’ earnings and makes it more difficult to shake off deflation by pushing down import prices.

Japanese authorities last intervened in 2011. At the time, Tokyo got G7 consent to stem a yen spike driven by speculation that a devastating earthquake and nuclear disaster in March would force Japanese insurers to repatriate funds to pay claims.

Some traders have said Japan cannot sell its own currency now, because the G20 warned countries in February to refrain from competitive devaluation.

Suga, who coordinates other ministers in Abe’s Cabinet, rejected this idea outright and said Abe’s remarks about arbitrary intervention in a Wall Street Journal interview last week were misunderstood.

The BoJ’s decision in January to adopt negative interest rates has drawn criticism from some countries that say it is a direct attempt to weaken the yen.