Japan pledges coordinated action to counter market volatility and economic fallout from Middle East tensions, with a focus on yen stability.

TOKYO: Japan stands ready to take action against market volatility stemming from the Middle East conflict, Finance Minister Satsuki Katayama said on Friday.

She told parliament the government was coordinating closely with overseas authorities, including its Group of Seven counterparts. “Markets are very volatile in the wake of developments in Iran,” Katayama said.

“We are ready to take all necessary steps, coordinating closely and nimbly with overseas authorities,” she added. The government is also prepared to compile an extra budget to combat the economic blow from the conflict.

Separately, Bank of Japan Deputy Governor Ryozo Himino said the central bank will be vigilant to yen moves. He noted exchange-rate fluctuations could affect underlying inflation and public perceptions of future price moves.

“We need to be mindful that exchange-rate fluctuation has a bigger impact on price moves than in the past,” Himino told the same parliamentary session. “Through this channel, they could affect inflation expectations and underlying inflation.”

While the BOJ does not directly target exchange rates, it will scrutinise currency moves given their significant impact on economic and price developments, Himino said. The remarks are the latest effort by policymakers to address sharp yen falls that push up import costs.

A widening conflict in the Middle East has boosted oil prices and jolted global financial markets. This clouds the outlook for Japan’s economy, which is heavily reliant on fuel imports.

The BOJ raised interest rates to a 30-year high of 0.75% in December. The move was another step in ending decades of massive monetary stimulus.

BOJ executives have signalled readiness to continue raising still-low interest rates. They have offered few hints, however, on the timing of the next rate hike.

 The Sun Malaysia