Japan 'firmly watching' FX, near-term action unlikely

By Tetsushi Kajimoto

TOKYO (Reuters) -Japan's finance minister said on authorities were "firmly watching" currency market moves, after Federal Reserve Chair Jerome Powell's comment flagging rate cuts next year may have prompted a spike in the yen against the dollar.

"I know there are various market talk but the finance ministry won't comment on any of them," Shunichi Suzuki told reporters, when asked about Powell's comment.

Powell said on Wednesday the question of when it will be appropriate to cut rates is coming into view. His remarks came after the Fed's latest policy meeting, alongside which the central bank issued forecasts showing policymakers see rates moving lower next year.

The yen spiked on Thursday following the U.S. currency's tumble, scaling its highest since July 31 at 140.95 per dollar. It was last traded around 142 yen to the dollar.

"I won't comment on every single day-to-day currency market move," Suzuki added. "Our basic stance is that it is desirable for currencies to move stably reflecting fundamentals."

Atsushi Takeda, chief economist at Itochu Economic Research Institute, said authorities would not intervene in the market unless the yen's moves are sharp and rapid in either direction, beyond 150 to the dollar or towards 130.

"Until then, it's the correction of excessive yen weakening, which will ease the pain of price hikes," he said.

Expectations that the Bank of Japan (BOJ) could end negative interest rates in the coming months have driven up the Japanese currency lately, particularly after Governor Kazuo Ueda said it would be "challenging" next year.

Japan last intervened in October last year by selling dollars for yen when the latter tumbled to almost 152 per dollar. Tokyo's past interventions have largely involved dollar-buying and yen-selling to prevent the Japanese currency's strength from undermining exports.