Tetsushi Kajmoto, Leika Kihara

TOKYO, Reuters – Japan’s central bank and government expressed concern over the recent sharp fall in the yen. This rare statement was the most severe warning yet that Tokyo might intervene in support of the currency. It has fallen to its lowest level in 20 years.

Masato Kanda (top currency diplomat) told reporters after meeting with his Bank of Japan counterpart that Tokyo will respond “flexibly to all possible options.”

He refused to confirm whether Tokyo would be able to negotiate with other nations to enter the market.

Japan is part of the G7. They have a policy where markets should determine currency rates. However, they will coordinate closely on currency movements and excessive or disorderly changes could harm growth.

In a joint statement, the Financial Services Agency, BOJ, and Ministry of Finance stated that they had seen sharp declines in the yen and were concerned by recent moves in currency markets.

The three institutions’ officials meet periodically to alert markets to market movements. It is not common for the three institutions to make a joint statement containing explicit warnings about currency movements.

Following the statement, the dollar plunged 0.70% to 133.41 yen.

Masahiro Ichikawa (NYSE:) DS Asset Management, said that it was likely a more toned down jawboning as the yen has fallen quickly in the last week.

“I don’t think Tokyo will engage in yen buying intervention, because that requires consent by the United States,” said he.

The BOJ, unlike other central banks that are threatening to raise interest rates to combat inflation, has consistently committed to maintaining low rates. This makes Japanese assets less appealing to investors, and sends the yen to within striking distance from the 135.20 mark on January 31, 2002. This would mark its lowest level since Oct 1998.