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Japan FX tsar Kanda says speculation behind weak yen, ready to take action

FILE PHOTO: G20 Finance Ministers and Central Bank Governors meeting

By Tetsushi Kajimoto

TOKYO (Reuters) -Japan's top currency diplomat on Monday warned against speculators trying to sell off the yen, saying its weakness did not reflect fundamentals, in the latest warning about the currency's "big slide" against the dollar.

Masato Kanda, the vice finance minister for international affairs, made the comment at an ad hoc news conference as the Japanese currency hovered close to a 32-year low near 152 to the dollar.

"Looking at currencies, the dollar/yen pair has gone through big fluctuations of 4% over only the past two weeks," Kanda told reporters.

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"It has not reflected fundamentals and I feel something strange about it."

Kanda described the recent yen moves as "speculative." He said he wouldn't rule out any measures but stands ready to respond appropriately to the currency's move.

He added he has been closely watching currency moves with a sense of urgency, even when he was travelling overseas over the weekend.

A weak yen can add to higher costs of living through more expensive imports.

The fact the government has tolerated the yen's descent beyond 150 to the dollar - compared with 2022 when it stepped into the market when it broke past 145 yen - suggests officials may lack a sense of crisis about a weak currency, analysts say.

"Kanda dialled up his warnings today against those who try to sell off the yen. However, intervention may not be conducted even if the dollar hit 155 yen," said Masafumi Yamamoto, chief FX strategist at Mizuho Securities.

The weak yen has not become a political issue in Japan or with its trading partners, and has brought windfalls such as a boon to inbound tourism and record stock market prices boosted by the weak yen.

Indeed, Kanda noted the yen weakness has its pluses and minuses, depending on economic players, adding he doesn't have a specific exchange level in mind when asked about defence lines.

Japan last intervened in the currency market in October 2022 by heavily buying the yen and selling the dollar.

The yen was trading around 151.27 to the dollar on Monday morning.

(Reporting by Tetsushi Kajimoto; Writing by Rocky Swift; Editing by Chang-Ran Kim, Kim Coghill and Lincoln Feast.)