Yen moves 'not a natural state'


Yen traders appear to be taking the economic numbers as positive news, but officials warn against rapid swings

By Alex Frew McMillan and wire reports

TOKYO, Japan (CNN) -- The yen broke through to 127.31 on Friday, as a new bullish sentiment about Japan refuses to die.

But Japanese officials warn that the currency moves are "not normal" and market manipulation may be going on.

The yen's dramatic strengthening began Thursday, when it moved from above 130 yen to the U.S. dollar to the 127 level.

Thursday was the first time the yen had been below 130 since Christmas. Its surge was the biggest one-day gain in two years.

Japan's gross domestic product shrank 1.2 percent in the fourth quarter, new figures released Friday show. That was worse than expected, but economists had warned a worse figure might be coming.

Yen traders are still interpreting recent signs that Japan's economy is recovering as positive. Their "buy yen" sentiment shows a new confidence in the country.

But Japanese officials are again warning that recent rapid swings in the currency are too dramatic.

"We are concerned that there might be some manipulative movements. This is not a natural state of the market, and we are looking into it," Masajuro Shiokawa told reporters on Friday. "If there are such movements, we must consider doing something against it."

Kuroda says Japan is watching

Japan's leading financial diplomat, Haruhiko Kuroda, expressed the same sentiments. He also repeated his warning of Thursday, that Japanese officials are monitoring the currency.

"Movements in exchange rates in the past several days have been too rapid and do not reflect economic fundamentals," Kuroda told reporters. "It is a bit too abnormal ... and not appropriate. I am watching the market movements with vigilance and will take appropriate action if needed."

Critics such as General Motors CEO Rick Wagoner have accused Japanese officials of not playing fair on their currency, by manipulating it verbally and intervening with foreign-currency reserves at times.

Rapid swings in any nation's currency make it hard for businesses trading with that country. They have to readjust prices faster and can see the value of shipments disappear while they are en route.

Japan's chief cabinet secretary, Yasuo Fukuda, said on Friday that the current swings are too swift.

"The forex movement at the moment is too rapid and problematic," Fukuda said at a press conference.

He said that could make it tough for international trade.

Japanese stocks are also stronger again on Friday, with the Nikkei index up 0.73 percent at 11,733.56 at the noon break.

The broad Topix index is up 0.18 percent at 1,100.31.

Reuters contributed to this report.