Japan sold the yen in the market and its central bank eased monetary policy on Thursday, following Switzerland in efforts to tame currencies buoyed by safe-haven demand from investors fretting about the health of the global economy.
Japan intervened in currency markets on Thursday to curb the yen's gains that officials fear threatened to derail the economy's recovery from a slump triggered by a massive earthquake in March.
Japan kept markets on guard for currency intervention and more monetary easing on Wednesday, with the finance minister vowing to stem the yen's rise and the prime minister calling for central bank action to protect the economy.
Japan tried to keep yen bulls on guard on Wednesday, with finance minister repeating his warning that he was closely watching markets after the currency shot near record highs early this week.
Japan primed financial markets on Tuesday for currency intervention after the yen tested record highs, signaling it may try to tame the unit with a combination of yen-selling and monetary easing.
The Bank of Japan is expected to ease monetary policy this week to support a fragile economic recovery if the yen continues to rise quickly enough to trigger currency intervention, sources familiar with the central bank's thinking said.
Asian shares fell on Tuesday on concerns about a downgrade of the United States credit rating and economic worries after sluggish data, while the yen gave some gains on jitters over the possibility of intervention by Bank of Japan.
Japanese Finance Minister Yoshihiko Noda signalled on Tuesday that Tokyo is in close touch with European and U.S. counterparts on the yen's strength, but declined to say if it would sell the yen to rein in its surge in value.
Japan on Friday escalated its warning to financial markets against testing the yen's upside further, with the finance ministry signaling that Tokyo may not wait for too long with action if the currency keeps climbing.
Republicans and Democrats rushed to rework rival deficit reduction plans on Wednesday, but with the fate of both proposals heavily in doubt top lawmakers pursued a behind-the-scenes compromise to avert a crippling U.S. default.
A Republican proposal to cut the U.S. deficit faced delay and stiff opposition on Wednesday, raising the risk of a debt default and a ratings downgrade as the clock ticks toward a deadline less than a week away.
Japanese authorities know there is not much they can do to turn a broad weak-dollar tide so will judge any intervention a success if it keeps speculative action from driving up the yen too far and too fast.
Assuming President Barack Obama and Congressional Republicans can not resolve the debt deal dispute in eight days, the unfathomable will happen -- a default by the U.S. Government. But that begs the question: what will the U.S. Federal Reserve do, if the U.S. Government defaults?
Japanese Finance Minister Yoshihiko Noda kept up his warning to markets against pushing up the yen too much, saying that he was aware of demands from the business sector for authorities to act against yen rises that hurt the export-reliant economy.
Japanese trade minister Banri Kaieda said on Tuesday that the Ministry of Finance and the Bank of Japan should consult and make an appropriate decision on intervening in the foreign exchange market, Jiji news agency reported.
Bank of Japan Governor Masaaki Shirakawa said on Monday that the central bank needs to closely watch recent rises in the yen, which may hurt the country's economy by undermining exports, corporate revenue and sentiment.
Japanese Finance Minister Yoshihiko Noda warned on Thursday that recent yen strength does not reflect economic fundamentals, escalating a verbal campaign to cool the rising yen although traders saw little immediate chance that authorities would intervene directly in the market.
The Bank of Japan kept monetary policy on hold and revised up its assessment of the economy on Tuesday, encouraged by a rebound in factory output and increasing signs that the recovery from the devastating March earthquake is broadening.
The Bank of Japan is expected to hold off on easing monetary policy further and revise up its assessment of the economy next week, encouraged by a pickup in factory output and recovery in business sentiment hit by the devastating earthquake in March.
Bank of Japan Governor Masaaki Shirakawa said the world economy continues to recover albeit at a slower pace, taking a slightly more cautious view on global growth as signs of a slowdown spread to emerging economies.
Japan must prevent currency rates and electricity costs from driving companies abroad after the March 11 earthquake raised concerns about the reliability of suppliers and the availability of power, Finance Minister Yoshihiko Noda said on Friday.
Japan's economy is already showing signs of recovering from a slump that followed a devastating earthquake in March, Bank of Japan Governor Masaaki Shirakawa said on Wednesday while stressing that the central bank would remain vigilant about economic risks.
