Japan warns of potential action over rapid currency fluctuations

Currency markets: Japan's top currency official, Masato Kanda, has issued a cautionary statement regarding potential action in response to erratic fluctuations in foreign exchange rates. Kanda underlined the importance of stability aligned with economic fundamentals in currency markets. He stated that while government intervention is not necessary when markets are functioning smoothly, it may be required in cases of excessive speculation-induced volatility. 

Recent suspicions suggest Japan may have intervened in the market to boost the yen's value after it plummeted to levels not seen in over three decades. Data from the Bank of Japan indicates substantial spending, amounting to over 9 trillion yen, in defence of the currency. Such interventions contributed to a notable rebound in the yen's value from its recent low against the dollar.

Kanda refrained from confirming or denying speculation about market interventions, in line with customary practice among currency authorities. While a weaker yen benefits Japanese exporters, it presents challenges for policymakers, including increased import costs, inflationary pressures, and household budget constraints.

Furthermore, Kanda highlighted widespread concerns about foreign exchange market volatility expressed by several countries during a meeting preceding the ASEAN+3 finance ministers and central bank governors conference in Tbilisi, Georgia. This collective apprehension underscores the broader impact of currency fluctuations beyond Japan, reflecting the shared interests of ASEAN members and East Asian partners in maintaining market stability.

(With Reuters inputs)