TOKYO: Japan’s government and central bank say they are concerned by recent sharp falls in the yen in a rare joint statement, the strongest warning to date that Tokyo could intervene to support the currency which has sunk to 20-year lows.

       After a meeting with his Bank of Japan (BoJ) counterpart, top currency diplomat Masato Kanda told reporters that Tokyo will “respond flexibly with all options on the table”.

       He declined to say whether Tokyo could negotiate with other countries to jointly step into the market.

       The Group of Seven, of which Japan is a member, has a long standing policy that markets ought to determine currency rates, but that the group will closely coordinate on currency moves, and that excessive and disorderly exchange-rate moves could hurt growth.

       “We have seen sharp yen declines and are concerned about recent currency market moves,” the Finance Ministry, BoJ and the Financial Services Agency said in the joint statement released after their executives’ meeting.

       Officials of the three institutions meet occasionally, usually to signal to markets their alarm over sharp market moves. But it is rare for them to issue a joint statement with explicit warnings over currency moves.

       The US dollar fell 0.70% to 133.41 yen (RM4.40) after the statement.

       “Tokyo could intervene if the yen slides below 135 (RM4.44) to the dollar and starts going into a free fall. That’s when Tokyo really needs to step in,” said Atsushi Takeda, chief economist at Itochu Economic Research Institute in Tokyo. “But Washington won’t join so it will be solo intervention. For the United States, there’s really no merit in joining Tokyo on intervention.”

       Unlike other major central banks which are flagging aggressive interest rate hikes to tackle inflation, the BoJ has repeatedly committed to keeping rates low, making Japanese assets less attractive for investors.

       That increasing policy divergence sent the yen down to within striking distance of 135.20 (RM4.46) hit on Jan 31, 2002. A break past that would be its lowest since October 1998.

       “What can potentially slow the pace of depreciation is a change in policy but right now it looks like there is no indication that BoJ is concerned about inflation or the impact of the weak yen on that,” said Moh Siong Sim, a currency strategist at Bank of Singapore. — Reuters