By Makiko Yamazaki and Rocky Swift
TOKYO, April 3 (Reuters) - Japanese Finance Minister Satsuki Katayama on Friday put currency traders on notice, saying the government stands ready to act against speculative moves in foreign exchange markets as volatility has risen "significantly."
The yen, trading near the psychologically key 160-per-dollar mark, lingered at levels that have repeatedly stoked concerns of market intervention, underscoring growing unease in Tokyo over the speed and scale of its decline.
"We are seeing a rise in speculative activity in both crude oil futures and foreign exchange markets, and volatility has increased significantly," Katayama said at a regular press conference.
Katayama has previously flagged speculative activity, but her latest comments highlight growing concerns among authorities as currency markets turn increasingly volatile.
"As exchange-rate volatility driven by these developments is affecting the livelihoods and economy of the public, we are prepared to respond fully on all fronts," the finance minister said.
Traders say markets are nervous about a possible yen-buying intervention by Tokyo, especially after Japan's top currency diplomat Atsushi Mimura issued his strongest warning yet of action on Monday.
Still, many doubt the firepower of any intervention at a time when geopolitical turmoil in the Middle East is fuelling relentless demand for the safe-haven dollar. Since the United States and Israel launched their war on Iran, the yen has slid about 2.3% against the dollar. It was fetching 159.52 per dollar in afternoon trade.
"Mimura, who is the key person do decide on intervention, made note of that move around 160," said Toshinobu Chiba, a Tokyo-based fund manager at Simplex Asset Management. "If intervention happens, I would start to short the yen, but timelines are uncertain, and it depends on if the U.S. Fed would follow on that move or not."
Others expect Tokyo to hold off for now. Hiroyuki Machida, director of Japan FX and commodities sales at ANZ, said authorities were unlikely to step in unless the yen weakens beyond 161-162 per dollar - territory last defended in July 2024.
"They will probably want to wait for the Bank of Japan's next policy meeting (on April 27-28)," he said. "If the BOJ raises rates and the yen recovers, then there would be no need to intervene. If the yen starts to weaken again after that, authorities could intervene."
Asked about the Bank of Japan's monetary policy outlook, Katayama said decisions on specific measures rest with the central bank, declining further comment.
Bank of Japan Governor Kazuo Ueda told parliament on March 30 that policy isn't set on the basis of exchange rates, but acknowledged that currency moves have a powerful impact on growth and prices - remarks widely seen as laying the groundwork for an April rate hike.
Speaking in parliament after the briefing, Katayama widened the warning, saying authorities were also closely watching the bond market after 10-year JGB yields touched a near three‑decade high.
"We will keep a close watch on developments in bond market volatility and respond firmly through a coordinated set of fiscal and monetary policies."
(Reporting by Makiko Yamazaki and Rocky Swift; Additional reporting by Yoshifumi Takemoto; Editing by Christopher Cushing and Shri Navaratnam)
