TOKYO, Jan 28 - Finance Minister Sadakazu Tanigaki said on Wednesday the yen's recent rise has been "slightly rapid" and warned of possible intervention by Japanese authorities. "Foreign exchange rates should reflect fundamentals, in a stable manner," he said in parliament. "But markets do often move on speculation. We will continue acting resolutely against overshooting." His comments come amid market speculation that Japanese authorities may hold back from further intervention to avoid criticism ahead of a key meeting of the Group of Seven industrial powers next week. Tanigaki had said on Tuesday that authorities were aiming to smooth volatility rather than keeping the yen at a certain level, remarks that prompted a further decline in the dollar.
The dollar traded at around 105.8 yen on Wednesday after hitting 105.45 yen, a fresh three-year low, in New York trade. Japan spent 20 trillion yen ($189.4 billion) to curb the yen's rapid rise last year and has been seen intervening again this month. "Our intervention amount last year was big, but that was because the market often overreacted against geopolitical risks or worries about terrorism," Tanigaki said in parliament. "The actual U.S. economy is very strong, but speculative moves have often appeared and that's why we've intervened." He declined to comment on whether the yen's current level was too high, instead giving a vague reply about the possible impact of a higher currency. "Generally speaking, a higher yen's impact on the economy includes a decrease in external demand, a deterioration in corporate profits, which leads to slower capital spending. On the other hand, it also boosts household purchasing power and can also improve corporate profits by lowering the cost of oil." ($1=105.59 yen)//