Kan voices concern over yen's 'rapid' rise

The dollar, which hit a 15-year low of 84.73 yen overnight as market players sought the safe-haven unit amid renewed jitters over the health of the global economy, changed hands at 85.66 yen in Tokyo after the comments.

Prime Minister Naoto Kan on Thursday said the yen's rise was too “rapid” and agreed with his right-hand man and Chief Cabinet Secretary Yoshito Sengoku to watch the situation closely, Japanese media reports said.

The greenback rose back above the key 85-yen level on news that Japanese officials showed concern over the unit's strength, which poses a threat to the export sector driving Japan's own fragile economic rebound.

“The news is a message that (the government) might step into the market,” prompting players to sell the yen, Kenichi Nishii, senior dealer at Bank of Tokyo-Mitsubishi UFJ, told Dow Jones Newswires.

The safe-haven unit has strengthened beyond the trading levels assumed earlier by many exporters who have eyed its rise with anxiety, as investors seek a refuge from dollar and euro volatility.

If sustained, a strong local currency would see companies facing further huge hits to overseas profits when repatriated.

Markets were closely watching whether Japanese authorities will act for the first time since 2004 to stem the yen's strength, with finance minister Yoshihiko Noda set to hold a press conference later Thursday.

Japan's vice finance minister for international affairs Rintaro Tamaki, the top bureaucrat in charge of currency issues, met Bank of Japan executive Hiroshi Nakaso to discuss market conditions.

This followed calls earlier this week from Noda, who said he wanted the Bank of Japan to “cooperate” more with the government to tackle the rising yen, in a sign of fresh pressure on the body from officials.

Doubts over the pace of recovery in the United States has pressured the dollar in recent weeks.

The downbeat view taken by the U.S. Federal Reserve Tuesday, which warned that recovery in the world's largest economy was slowing and opted for further stimulus measures, has also boosted demand for the yen.

However, many market players believe Japanese authorities are unlikely to step in with markets at the current level.

“It would be difficult for Japan to get the nod from (western financial capitals) for a big yen-selling intervention,” said Hideaki Inoue, dealer at Mitsubishi UFJ Trust and Banking.

“Japan also needs to be seen to practice what it preaches, having urged China to let its currency float freely.”

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