WASHINGTON (AFX) - Japanese officials are signalling comfort with further yen weakness, by their conspicuous absence of cautionary remarks about the yen's decline, said Marc Chandler, chief currency strategist at Mellon Bank.
Japanese Finance Minister Kiichi Miyazawa said earlier today that "without any policy weapons at present it is no use to discuss the forex matter."
Chandler said "this is a euphemism. When they say they want the market not to be manipulated, but let market forces prevail, that means it is OK to sell the yen."
"Official concern about the yen's fall is notable by its absence," he said, noting that the dollar broke 124 against the yen in trading earlier today.
"There's been a pretty big pace of yen depreciation, but there's been no word that it would be detrimental to Japanese stock markets in any fashion... They are not giving any reason for the currency market to stop selling the yen," Chandler noted.
"They are signalling that there is no obstacle to where the market is taking the yen," he added.
There has also been a lack of response from the U.S. side. This may be influenced by the Bush administration's increasing emphasis on security, rather than economic, ties with Japan, Chandler said.
The U.S. will likely become concerned with the yen's weakness at the point it starts weighing on the Asian region, he said.
"We're not there yet... there is no significant concern at this point," Chandler said, but this will be a crucial turning point.