Reuters/Tokyo
Japan’s finance minister put traders on alert for possible currency intervention yesterday after the yen’s rise to a record high against the dollar threatens to further squeeze exporters’ profits and hold back economic recovery.In a sign of resilience, Japan’s exports growth slowed down less than expected in September, finance ministry data showed, but economists warn that persistent yen strength and Europe’s sovereign debt woes pose increasing risks to external demand.The Bank of Japan, which meets on Thursday, will probably cut its economic forecasts because of slowing global growth but keep monetary policy unchanged unless disappointment over Europe’s plans to solve its crisis roils markets.Even if the BoJ keeps policy unchanged this week, Japan’s government and central bank may not be able to hold off from taking action much longer as safe-haven flows keep the yen stubbornly high against the US currency.“The dollar/yen rate fell sharply, to between ¥75 and 76, in a short time. This is an utterly speculative move and not reflecting the economic fundamentals at all. This is regrettable,” Finance Minister Jun Azumi told reporters.“If this move becomes excessive, we have to take decisive action. I have already instructed my staff on Saturday to be prepared to take action.”He added that the strong yen would have a major impact on Japan’s export sector, especially the auto industry, and could dent the country’s economic recovery from a slump triggered by the March 11 earthquake and tsunami.Azumi spoke after the dollar hit a record low of ¥75.78 on trading platform EBS on Friday. That surpassed its previous record low of ¥75.94 in August, and brought back into focus the possibility of official intervention to weaken the Japanese currency.The dollar rose slightly after Azumi’s remark, standing around ¥76.40 on Monday.Analysts do not rule out a currency intervention, most likely unilateral, if yen rises continue.“Japan may intervene in the currency market if dollar/yen stays below 76 or falls below 75. Unless it intervenes, the yen may continue to rise and verbal warnings alone may not be able to reverse that trend,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.Since September last year, the government has intervened twice on its own and once jointly with other Group of Seven rich nations to weaken the yen, but the effects of intervention have proved short-lived.Japan’s exports rose 2.4% in September from a year earlier, boosted by shipments of cars and car parts. That compared with a median forecast for a 1% increase, and followed a 2.8% climb in the year to August.Imports increased 12.1% in September, against a forecast of a 12.6% rise.The trade balance turned to a surplus of ¥300.4bn ($3.95bn) following the previous month’s deficit. That compared with a median forecast of a ¥198.8bn surplus.Exports to Asia, which account for more than half of Japan’s total exports, edged up 0.2% from a year earlier, with China taking in 2.7% more Japanese goods than a year ago while exports to the US were up 0.4%.The Japanese economy probably rebounded in the third quarter from the damage caused by the March 11 disaster but is expected to slow to a crawl in the final quarter due to an intensifying eurozone debt crisis that threatens to drag down the world economy, a Reuters poll shows.Eurozone leaders are striving to agree on new steps to reduce Greece’s debt, strengthen the capital of banks with exposure to troubled eurozone sovereigns and leverage the eurozone’s rescue fund to stem contagion to bigger economies.