The Group of Seven is ready to "act decisively" again if currency market speculation persists, Japanese deputy finance minister Fumihiko Igarashi said on Friday after the G7 agreed to intervene together to restrain the soaring yen.
Igarashi told Reuters in an interview he was satisfied with the impact the rare joint action had on Japanese markets, helping boost stocks and weakening the yen.
The yen weakened by the most since 2008 versus the dollar, and U.S. index futures rose after central banks intervened to weaken Japan’s currency.
The yen lost 2.6% against its 16 most-traded peers and sank 3.2% versus the dollar at 10:25 a.m. in London. The Stoxx Europe 600 Index fluctuated between gains and losses and Standard & Poor’s 500 Index futures gained 0.4%. Japan’s Nikkei 225 Stock Average added 2.7%.
The G7 show of solidarity came as a surprise to many because Tokyo had indicated it was looking for moral support for its attempts to calm markets rather than concerted intervention.
"The yen’s rise was driven by speculators," Igarashi, one of Finance Minister Yoshihiko Noda’s two deputies, said.
"G7 countries agreed that if we caved in to such speculators that took advantage of people’s misfortunes, the Japanese economy would be ruined and the whole world economy would be harmed," he said.
"Our stance remains unchanged that we will take decisive steps against speculators who act like sneaky thieves at a scene of a fire."
G7 agreed that authorities should in principle stay away from markets but that Japan was in a state of emergency, struggling to cope with a triple blow of a deadly earthquake, tsunami and the world’s worst nuclear accident since Chernobyl.
The U.S. dollar surged two full yen to as much as 81.83 yen JPY, leaving behind a record low of 76.25 hit earlier this week as the Bank of Japan kicked off the joint action. Media reported it bought more than $25 billion.
Asked about the size of Friday’s intervention, Igarashi said he simply was not sure what was the total amount.Japan’s Nikkei share index climbed nearly 3%, recouping some of the week’s stinging losses in the aftermath of last week’s 9.0 magnitude earthquake.
As he was speaking, traders were reporting that European central bank sprung into action, with French and German central banks officially confirming they took part in the intervention.
Igarashi said the finance ministry expected the Bank of Japan to continue supplying ample funds to financial institutions to maximise the impact of the intervention.
"We think it is desirable for the BOJ to steadily carry it out (ample fund injections) and we highly value the fact that the bank has been doing so."
Igarashi said much credit for the swift and rare G7 action went to Noda and his good relations with U.S. Treasury Secretary Timothy Geithner, and that it was not certain before Friday’s G7 conference call that it would lead to a joint intervention.
"It was not clear if the statement would turn out this clearcut (on joint action). Noda took strong initiative in seeking a clear stance on this and persuaded other countries to agree."
The last time the G7 agreed on joint intervention was a decade ago to turn a slumping euro following its 1999 launch.
The G7 comprises Canada, France, Germany, Italy, Japan, the United Kingdom and United States.
