Japan and the euro-zone authorities have discussed the prospect of joint currency market intervention if the yen and euro continue to strengthen against the dollar, a senior Japanese finance ministry official said yesterday.
Although he declined to comment on his European counterparts' response, he said a common euro-zone view had emerged that the euro had reached levels that were harming Europe's economy. The European Central Bank refused to comment.
The official added that recent comments about the US current account deficit by Mr Alan Greenspan, chairman of the US Federal Reserve, were a "misjudgment" that had increased market volatility.
The official's comments mark rising stridency in Japanese rhetoric about currencies, and a determination not to let US disapproval prevent Japan from resuming its intervention campaign to slow the yen's rise.
Mr Hiroshi Watanabe, vice-finance minister for international affairs, said yesterday: "Conditions are in place for Japan and Europe to be able to take harmonised action. It is natural for Japan and Europe to act when the dollar alone is falling."
After rising sharply in recent weeks, the yen has stabilised in the past few days around 103 yen against the dollar. But the euro hit a new high against the dollar, just above $1.33 yesterday, and sterling reached a 12-year record of $1.93.
The last joint direct currency intervention was in 2000, to support the euro. The Japanese ministry of finance, which sets currency policy, has not ordered unilateral intervention to prevent the yen appreciating since March.
Previous Japanese intervention campaigns have drawn criticism from the US administration. But the Japanese official was defiant. "We don't care what America says. We will defend ourselves," he said.
He also criticised US administration pressure for China to float its currency, now pegged to the dollar, saying that it made "no sense" to blame China for the US current account deficit and that growth in many Asian countries remained heavily dependent on exports to the US.
His remarks follow a blunt warning from Mr Li Ruogu, the deputy governor of the People's Bank of China, that the US should not blame other countries for its economic difficulties. Official Japanese irritation with US policymakers extends to the Federal Reserve.
Mr Greenspan's comments on November 19th about the "increasingly untenable" US current account deficit, which caused a flurry of speculation about Asian and other central banks shifting reserves out of dollar-denominated assets, were a "misjudgment", the Japanese official said.
The official said that weakness in US stock and bond prices following Mr Greenspan's comments revealed worries over the foreign capital needed to fund the US current account deficit.
The Fed should raise interest rates further to make dollar-denominated assets more attractive and stem the dollar's fall, he added.
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