Washington says yen moves ‘orderly’, suggesting Japan has no justification to intervene

Japan and the United States remained at loggerheads over exchange-rate policy on Friday with Washington saying yen moves continued to be “orderly,” signaling that Tokyo has no justification to intervene in the market to stem yen gains.

Japanese Finance Minister Taro Aso reiterated Tokyo’s view that excessive and disorderly currency moves were undesirable, making it clear authorities won’t hesitate to step into the market if they consider any yen spike as out of line with economic fundamentals.

“In line with previous commitments by G7 and G20, I said stability in exchange rates is extremely important as excess volatility and disorderly movements would hurt the economy,” Aso told reporters after meeting Group of Seven (G7) finance leaders in Sendai, northeast Japan.

But a senior U.S. Treasury official said currency moves are deemed “disorderly” enough to warrant intervention only when they are triggered by a crisis such as the devastating earthquake and tsunami that hit northeast Japan in March 2011.

There needs to be a distinction between such moves and market fluctuations “that happen,” the official said, adding that “you know” when truly disorderly conditions occur.

“We’ve had agreements in the G7 and G20 for a number of years that have been very solid, workable … that give all of us the ability to use domestic tools for domestic purposes, but that they commit to refraining from exchange-rate targeting unless there are disorderly conditions,” the official said.

“I continue to believe that Japan has orderly conditions,” he said, when asked whether Washington’s stance on the yen has not changed since last month’s Group of 20 finance leaders’ gathering in Washington.