Japan finance minister offers no clues on intervention as yen weakens

By Tetsushi Kajimoto

TOKYO (Reuters) -Japanese Finance Minister Shunichi Suzuki said on Friday that currencies should be set by markets although sudden moves are undesirable, while signalling no clear sign of intervening in the market to shore up the weak yen, which is driving up import bills.

"Currencies should reflect economic fundamentals ... I'm closely watching currency moves," Suzuki told reporters, toeing the standard official line.

"There's no change to my view on currencies since (what) I stated previously. There's nothing to add," Suzuki said.

Some market players were surprised by the lack of determination to keep the yen from falling beyond 145 yen to the dollar. A breach of that level last September triggered Japan's first yen-buying intervention in 24 years.

"I was surprised by the lack of enthusiasm in Suzuki's comment," said Daisaku Ueno, chief FX strategist, at Mitsubishi UFJ (NYSE:MUFG) Securities. "It made me think Japanese authorities will wait until the dollar hits a 32-year low near 152 yen to intervene."

Speculation is lingering in currency markets that Japanese authorities may change tack on the weak yen by focusing on fiscal policy measures, such as maintaining a gasoline subsidy to mitigate the impact of price hikes on consumers.

Authorities also say the weaker yen is helping attract more foreign tourists, buoying the services sector.

Another possibility was that Japan could not win U.S. acceptance on a dollar-selling intervention.

The yen has been on weak footing lately as investors raised bets that the U.S. Federal Reserve could continue hiking interest rates, or keep rates higher for longer as it tries to rein in inflation, while the Bank of Japan maintains its ultra-loose policy.

Traders are watching for any signs of intervention by Japanese officials to shore up the ailing currency.

However, Japanese officials have rarely escalated verbal warnings since last month against speculators trying to sell off the yen.

The weak yen has driven up import bills for fuel and foods, depriving households of purchasing power and prompting Prime Minister Fumio Kishida to scramble for measures to subsidise gasoline retail prices and to mitigate rises in utility bills.

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The BOJ remains an outlier among global central banks with its loose monetary policy, even as it slowly shifts away from yield curve control.