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. Last Updated: 07/27/2016

Yen Rises on Intervention Talk

TOKYO --The Japanese rhetoric may be conflicting, but currency markets are all set to buy the yen anyway on the belief that a strengthening economy and rising stock market will eventually boost the currency.

Japan's Finance Ministry on Monday dismissed a report in The Times of London that quoted a Bank of Japan official as saying its yen-weakening intervention had ended.

To some in the market, the episode was a reminder that the BOJ, which intervenes in the yen markets, and the ministry, which decides intervention policy, did not see eye-to-eye.

Others thought it was a carefully plotted plan by the Japanese central bank and the ministry to progressively communicate a softening in the government's weak-yen policy preference.

The yen rose to within striking distance of last month's highs near 105 per dollar Monday, before markets got nervous about testing the Bank of Japan's resolve.

"The [ministry] makes the call, the BOJ is merely the agent," said Patrick Bennett, a Singapore-based strategist with Commerzbank.

"But regardless of the comments, there is merit in the conclusion that if the economy performs strongly and the equity market is on an upward trajectory, then the safety to stand against yen strength in the same fashion as recently has been diminished."

While many in the market remained skeptical that Japan's economy could cope with a sharply higher yen, The Times quoted a BOJ official as saying the authorities now could be confident that the recovery no longer depended on export strength.

All the market needed was a trigger, analysts said, to push the yen beyond 105 per dollar, and that could come from this week's quarterly "tankan" business survey or the start of the new fiscal year in April.

Tokyo's benchmark Nikkei stock average hit a 22-month high Monday. Economic growth rose to an annual 6.4 percent, the fastest in 13 years, in October-December. Last week, rating agency Standard & Poor's upgraded its outlook on Japan to stable.

"Irrespective of the [ministry], irrespective of The Times, the driver could be the fundamentals that continue to improve," said Claudio Piron, currency strategist with Standard Chartered Bank.