Japan keeps up yen warnings; 6 trillion yen, 2-day intervention suspected

By Leika Kihara

TOKYO (Reuters) -Japan stands ready to take all possible measures to counter excessively volatile currency moves, Chief Cabinet Secretary Yoshimasa Hayashi said on Tuesday, keeping markets on alert over the chance of renewed intervention to prop up the yen.

Bank of Japan data released on Tuesday suggested Tokyo may have spent 2.14 trillion yen ($13.5 billion) intervening on Friday last week. Combined with the estimated amount spent on Thursday, Japan is suspected to have bought nearly 6 trillion yen via intervention last week.

"It is important for currency rates to move stably reflecting fundamentals. Excessive volatility is undesirable," Hayashi told a regular news conference before the release of the BOJ data.

"We will closely watch exchange-rate developments and stand ready to take all possible measures," he said.

Hayashi declined to comment when asked whether Tokyo intervened in the currency market to prop up the yen for two straight days last week.

Japanese authorities have recently made it standard practice to not confirm whether they have intervened in the currency market or not.

But traders suspect Tokyo intervened in the market to lift a currency that has languished at 38-year lows, once on Thursday after cooler-than-expected U.S. inflation report triggered a jump in the yen, and again on Friday.

The yen jumped 3% against the dollar to 157.40 after Thursday's suspected intervention.

But it lost most of its ground and stood at 158.45 on Tuesday, not far off the 160 mark seen as Japanese authorities' line-in-the-sand for currency intervention.

Some analysts see similarities between last week's suspected intervention and that on May 1, when dovish comments from Federal Reserve Chair Jerome Powell weighed on the dollar.

In both cases, Tokyo likely intervened when the dollar was already on the back foot against the yen, said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

"This time, intervention came when the dollar/yen wasn't necessarily rising sharply," he said. "This suggests authorities were worried more about the level of the yen, at below 160 (to the dollar), rather the speed of its falls."

While a weak yen gives exporters a boost, it has become a source of concern for Japanese policymakers as it hurts consumption by inflating the cost of fuel and food imports.

Markets are turning their attention to the Bank of Japan's two-day policy meeting concluding on July 31, with some traders betting it could raise interest rates from current near-zero levels to help slow the yen's declines.

($1 = 158.4400 yen)