Japanese Finance Minister Shunichi Suzuki told a press conference that recent currency moves are somewhat volatile. The Japanese government is watching currency moves "with a heightened sense of vigilance" and it will take "appropriate action" if needed by closely communicating with monetary authorities in other nations.
"We have an agreement by the Group of Seven and others that excess volatility and disorderly movements in exchange rates can have an adverse impact on economic and financial stability," said Suzuki.
The U.S. Federal Reserve's aggressive interest rate hikes to combat inflation and the likelihood these will continue into next year and could be raised further has led to the yen being dumped for the U.S. dollar, strategists here said.
Conversely, the Bank of Japan (BOJ) has stayed committed to its ultra-loose monetary policy, setting its short-term benchmark interest rates at minus 0.1 percent, while continuing to guide 10-year Japanese government bond yields to around zero percent.
The BOJ's dovish policy stance has seen interest rates between Japan and the United States widen, which has triggered U.S. dollar buying and the yen's weakness and is causing volatility in the stock market here.
A weak yen, on the one hand, is a boon for Japan's export-led economy, as profits from exporters made overseas get a boost when repatriated and price competitiveness is enhanced in foreign markets when the yen is weaker than its major counterparts, investment strategists explained.
On the other hand, they said, a weak yen further inflates prices for energy and raw material products, essential for resource-poor Japan to continually import.
Japan's top government spokesperson Chief Cabinet Secretary Hirokazu Matsuno on Friday doubled down on remarks made a day earlier saying, "Rapid fluctuations are undesirable."
He previously said that currency rates should move stably and reflect economic fundamentals.
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