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Japan economy minister says G7 or G20 should discuss FX

By Stanley White

TOKYO (Reuters) - Japanese Economics Minister Kaoru Yosano pressed on Thursday for the Group of Seven or Group of 20 to hold talks on managing currency moves as Japan launched intervention to weaken the yen.

Japan acted a day after Switzerland's central bank surprised financial markets by cutting interest rates in an attempt to weaken the Swiss franc.

Both countries have seen their currencies driven higher by investors seeking a safe haven amid the worsening euro zone debt crisis and fears the United States is sliding back into recession.

Yosano, speaking to reporters, said intervention had been necessary because currency moves had not reflected economic fundamentals.

"This is also a question of whether the yen is strong or other foreign currencies are weak, so I think G7 and G20 officials will need to thoroughly discuss currency moves from here on as a global issue," Yosano said.

Although G7 and G20 finance ministers are due to hold long-scheduled meetings at different times next month, Japan did not appear to have formally requested any specific discussion on currencies by either group.

One government official involved in Japan's contacts with its international partners told Reuters he was not aware of any plans for a debate about currencies that would go beyond regular G7/G20 discussions as part of the broad debate about global imbalances.

Japanese authorities sold 1 trillion yen ($12.6 billion) on Thursday in their first intervention in the currency market since March, as the yen threatened to reach a record high against the dollar.

Japan's actions showed Tokyo would intervene again in response to big foreign exchange moves, Yosano said.

The G20 has become the main forum for attempts to tackle imbalances in the global economy since leaders from major developed and emerging economies gathered in London in April 2009 to try and plot a way out of the 2008/09 financial crisis.

The last time Japan stepped into the foreign exchange market, in March, it intervened jointly with other members of the G7 group of big developed nations. The latest intervention has been a solo effort.

Traders said the size of Japan's intervention so far is estimated at more than 1 trillion yen, and some market players speculated that Japan's action could end up rivaling the 2.1 trillion yen in intervention it conducted on September 15 of last year -- Japan's biggest one-day yen-selling intervention ever.

Last year, Brazil's Finance Minister Guido Mantega warned a "currency war" was erupting as countries sought to weaken their currencies to support export growth.

That, and the Federal Reserve's quantitative easing program, was blamed for fuelling hot money flows into emerging economies, fanning inflation and triggering interest rate rises.

Currency tensions are now returning to the fore, as renewed concerns about the health of the U.S. economy weighs on the dollar.

Economic data this week has painted a gloomy picture, with U.S. consumer spending falling in June for the first time in nearly two years and manufacturing growth in the United States, Europe and even China at a near standstill.

(Editing by Tomasz Janowski and Alex Richardson)

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