A Japanese yen banknote is seen with an exchange rate graph in this illustrative photo taken June 16, 2022. REUTERS/Florence Lo/Illustration

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  • News of rate controls pushes yen away from 24-year low
  • Finance minister clarifies foreign exchange intervention among options
  • MOF declines to comment, when asked about rate check news
  • Government jaw points to September 21-22 BOJ meeting
  • BOJ keeps rates ultra-low – sources

TOKYO, Sept 14 (Reuters) – The Bank of Japan carried out a rate check on Wednesday in apparent preparation for monetary intervention, a market source told Reuters, as policymakers stepped up warnings of recent falls money fast.

As the yen pulled away from a recent 24-year low following the rate control announcement, analysts said the move would only give the currency brief support as real intervention authorities to buy yen was highly unlikely.

News of the rate controls, reported earlier by the Nikkei newspaper, sent the yen up more than 1% to 143.00 to the dollar, well above the 24-year low near 145 hit last week.

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The move underscores growing concern among policymakers over the sharp drop in the currency, which not only hurts consumption by inflating the cost of imported raw materials, but increases uncertainty for businesses in making business decisions.

“The recent moves are swift and one-sided, and we are very concerned. If such moves continue, we must respond without ruling out any options,” Finance Minister Shunichi Suzuki told reporters before the Nikkei reported on the incident. rate checking.

“We’re talking about taking all available options, so it’s okay to think so,” Suzuki said, when asked if currency intervention buying yen was among the government’s options.

The remark was the loudest yet by government officials to signal the possibility of intervention, which markets view as highly unlikely given the difficulty Tokyo would face in securing agreement from its partners in the G7.

Speaking to Reuters after the dollar in London fell to 143.00 yen, down 1.09%, a Ministry of Finance (MOF) official said he could not comment on the news. a rate control or if the MOF had intervened in the foreign exchange market.

The yen has depreciated nearly 30% this year as the Bank of Japan (BOJ) has maintained very loose policy while many of its global counterparts, such as the US Federal Reserve, have aggressively hiked rates of interest to fight soaring inflation, making Japanese assets less attractive to investors.

Besides verbal warnings, Japanese policymakers have several options to stem excessive yen falls. Among them, a rare direct intervention in the currency market, the sale of dollars and the purchase of large amounts of yen.

A rate check by the BOJ, a practice in which central bank officials call dealers and ask for the price of buying or selling yen, is seen in forex markets as a possible precursor to action. Read more

When the BOJ conducted its check, the rate was around 144.9 to the dollar, the Jiji news agency said, citing a market source. The 145 mark is considered a key level for market watchers.

Many traders were still doubtful an intervention was imminent, but the yen’s jump signaled mounting nerves. The timing of the BOJ’s decision also suggests that 145 to the dollar will be an important level for markets and authorities.

“My feeling is that the MOF will not intervene at this stage and stick to verbal warnings,” said Takeshi Minami, chief economist at the Norinchukin Research Institute in Tokyo.

“There’s still a week to go before the Fed’s rate-setting meeting. I don’t think the markets believe the department will intervene at current dollar/yen levels.”

Rob Carnell, ING’s Asia-Pacific research manager in Singapore, highlighted the barriers to intervention.

“Never say never. They’ve been stepping up the rhetoric lately,” he said. “But I would be cautious about the inevitability of their intervention. Japan is a G20 signatory and they have non-intervention policies.”

Data released on Tuesday showing surprisingly strong US inflation for August prompted bets that the Fed would hold the rate hike longer, adding downward pressure on the yen.

Asked about the reports from the rate check, Chief Cabinet Secretary Hirokazu Matsuno said in a briefing on Wednesday that the government was carefully monitoring the markets and would coordinate closely with the BOJ.

News of a rate check could draw market attention to what the BOJ may decide at its September 21-22 policy meeting, which will follow the Fed’s September 20-21 rate-setting meeting.

Sources close to his thinking told Reuters earlier that the BOJ has no plans to raise interest rates or change its dovish policy guidance to support the yen. Read more

Although the BOJ is expected to keep interest rates extremely low, it could issue a warning against strong yen action after its meeting, either in its policy statement or in the briefing of the Governor Haruhiko Kuroda, according to analysts.

Once welcomed for boosting exports, the weak yen is becoming a headache for Japanese policymakers as it hurts households and retailers by inflating the already rising prices of imported fuels and food.

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Reporting by Kantaro Komiya, Leika Kihara and Tetsushi Kajimoto; Additional reporting by Daniel Leussink; Written by Kim Coghill; Editing by Neil Fullick and Bradley Perrett

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