Yen has gained strength on the back of the European debt turmoil leading to safe haven flows to the Japanese currency as the euro and dollar are weighed down. This has caused concern to Japanese Finance Minister Jun Azumi who said on Friday that he is monitoring currency moves with extra care and is prepared to act as appropriate. This hints at readiness to intervene in the currency markets and sell yen to curb its strength.
Azumi further added that speculators were over-reacting after the yen rose to a three-month high versus the dollar and the euro.
Speculation is growing over whether Greece will have to leave the euro zone because its economy won’t survive the fiscal spending cuts needed to bring its public debt under control.
This resulted in the dollar tumbling over 1 percent against the yen on Thursday to hit a three-month low of 79.12 yen while the euro extended its decline into the European trading session on Friday to reach a fresh three-month low of 100.19 yen.
Last October 31, the Bank of Japan intervened in the currency markets when the dollar fell to a record low against yen. The unilateral intervention cost a record 8 trillion yen ($100.6 billion) to halt the surge in yen. A strong yen threatens Japan’s export-focused economy.