BOJ checks FX rates in apparent preparation for currency intervention -Nikkei By Reuters

By Kantaro Komiya and Leika Kihara

TOKYO (Reuters) -The Bank of Japan has conducted a rate check in apparent preparation for currency intervention, the website reported on Wednesday, citing unidentified sources, as policymakers stepped up warnings about sharp falls in the yen.

The yen rose slightly from a near 24-year low against the dollar after the report, to trade around 143.86 at 0500 GMT.

Aside from verbal warnings, Japanese policymakers have several options to stem excessive yen falls. Among them is to directly intervene in the currency market, selling dollars and buying up large amounts of yen.

A rate check by the BOJ, a practice where central bank officials call up dealers asking for the price of buying or selling yen, is seen in currency markets as a possible precursor to action.

Japanese Finance Minister Shunichi Suzuki said earlier on Wednesday that currency intervention was among options the government would consider.

Data issued on Tuesday showing unexpectedly strong U.S. inflation for August prompted bets on the U.S. Federal Reserve raising interest rates higher and for longer, increasing downward pressure on the yen.

“Recent moves are rapid and one-sided, and we’re very concerned. If such moves continue, we must respond without ruling out any options,” Suzuki told reporters on Wednesday.

“We’re talking about taking all available options, so it’s correct to think so,” Suzuki said when asked whether yen-buying currency intervention was among the government’s options.

The remark was the strongest to date by government officials in signalling the possibility of currency intervention, which markets have nonetheless considered highly unlikely due to the difficulty Tokyo would face in getting agreement from its G7 partners.

Japanese policymakers have struggled to slow the yen’s recent sharp falls as investors have focused on widening policy divergence between the Fed’s aggressive rate hike plans and the BOJ’s pledge to maintain ultra-loose monetary policy.

Once welcomed for giving exports a boost, the yen’s weakness is becoming a cause for headaches for Japanese policymakers, because it hurts households and retailers by inflating the already rising prices of imported fuel and food.

Yen-buying intervention has been very rare. The last time Japan intervened to support its currency was in 1998, when the Asian financial crisis triggered a yen sell-off and a rapid capital outflow from the region. Before that, Tokyo intervened to counter yen falls in 1991-1992.