TOKYO, June 13 (Reuters) – Tokyo is concerned about the sharp decline in the yen and stands ready to “respond appropriately” if necessary, a Japanese government spokesman said on Monday, issuing a new warning to markets.

The remark echoed Friday’s joint statement from the government and central bank, but failed to avert a fall in the yen to 135.22 against the dollar, the currency’s lowest level since October 1998.

“It’s important that exchange rates move in a stable manner, reflecting fundamentals. But there have been recent sharp declines in the yen, which worries us,” Chief Cabinet Secretary Hirokazu Matsuno said during a briefing. regular press conference.

“We stand ready to respond appropriately as needed, while communicating closely with each country’s monetary authorities.”

Matsuno, however, declined to say whether Tokyo would step in to curb the yen’s sharp decline.

Unlike other major central banks, which signal aggressive interest rate hikes to fight inflation, the Bank of Japan (BOJ) has repeatedly pledged to keep rates low, making Japanese assets less attractive to investors.

This growing policy divergence has caused the yen to fall more than 15% against the dollar since early March.

Central bank chief Haruhiko Kuroda also warned of the downsides of the yen’s decline, abandoning his long-held position that currency weakness was generally good for the export-dependent economy.

“The recent sharp declines in the yen are negative for the Japanese economy and therefore undesirable, as they make it difficult for companies to draw up business plans,” Kuroda, the bank’s governor, told parliament on Monday.

“The BOJ will communicate closely with the government and review the impact of currency movements on the economy and prices.”

Kuroda reiterated his pledge to maintain an ultra-loose monetary policy to support an economy that has yet to fully recover from the hit of the coronavirus pandemic.

The yen rallied briefly on Friday night after the rare joint statement, seen as the strongest warning yet that Tokyo could step in to support the currency. Read more

But the currency lost momentum as the dollar strengthened after Friday’s U.S. inflation data bolstered market expectations for the Federal Reserve to aggressively raise interest rates in the fight against the surge in inflation.

Reporting by Leika Kihara and Kantaro Komiya; Additional reporting by Mariko Katsumura and Tetsushi Kajimoto; Editing by Shri Navaratnam and Clarence Fernandez

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