Thursday January 22, 04:07 AM
UPDATE 2-Japan watching currencies, mum on intervention
By Tetsushi Kajimoto
TOKYO, Jan 22 (Reuters) - Japan's top currency bureaucrat said on Thursday that he was monitoring foreign exchange markets but declined to comment on whether Tokyo would intervene to rein in the yen, which hit a 13-year high against the dollar.
'I am watching market moves closely,' Naoyuki Shinohara, vice minister for international affairs, told reporters.
Asked about the possibility of Japanese authorities intervening in markets to stem the yen's surge, he said: 'No comment on intervention.'
A yen rally of nearly 20 percent against the dollar last year, driven in part by a flight of Japanese capital from risky foreign assets, has hammered exports and pushed the world's second largest economy deeper into recession. Exports plunged a record 35 percent in December.
The currency has gained a further 2 percent this year but an analyst said the relatively measured rise made intervention unlikely.
'It's not a sharp enough move to justify intervention,' said Masamichi Adachi, a senior economist at JPMorgan.
'Other countries would bear the brunt if Japan tries to weaken the yen. When most economies around the world are performing badly, it's hard for Japan to convince them that currency intervention is necessary.'
Japan has not intervened in currency markets since 2004.
The dollar traded at 88.80 yen, on Thursday, rebounding from Wednesday's low of 87.10 yen, the lowest since July 1995.
The euro dropped 1 percent to 115.27 yen, falling towards a near 7-year trough of 112.08 yen.
Japanese authorities have previously tried to talk down the yen, especially after the dollar crashed through 90 yen last year.
The Group of Seven rich nations even issued a statement signalling concern about the yen rally, but France said other G7 states had no plans to support any Tokyo intervention.
That statement was issued in October at the height of the market turmoil triggered by the global financial crisis and the collapse of U.S. banks.
Intervention talk gathered momentum again on Wednesday as currency volatility was seen moving up the G7 agenda. A source told Reuters the G7 would discuss the crumbling British pound at a meeting of finance ministers in February.
(Writing by Jan Dahinten; Editing by Rodney Joyce) Keywords: JAPAN ECONOMY/FOREX
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