Japan made sure that language warning against excess currency market volatility remained in place when G20 finance leaders made a rare tweak to their message on exchange-rate moves, said officials with knowledge of the deliberations.
In the first communique compiled since US President Joe Biden took office, finance leaders of the Group of 20 major economies called for the need for currency moves to reflect "underlying" economic fundamentals.
It also noted that flexible currency moves can "facilitate the adjustment" of economies. Removed was a line stressing the need for "stable" exchange rates, which was inserted under the former administration of Donald Trump, who repeatedly sought to talk down the dollar to give US exports a trade advantage.
Some market players saw the change as reflecting new US Treasury Secretary Janet Yellen's belief that markets should determine currency moves.
"It was reflection of Yellen's belief in market-oriented exchange rates," said Daisaku Ueno, chief foreign exchange strategist at Mitsubishi UFJ Morgan Stanley Securities. "Japan and other countries made no objection as it was not meant to change the G20 stance on currencies."
Finance Minister Taro Aso said the new language was a clarification, not a change, to the G20's stance, in a sign of Tokyo's alarm over any repercussion the new language could cause in what has been a comfortable market environment for Japan.
"We can't rule out the chance some countries may forcefully devalue their currencies that deviate fundamentals. That's not good," Aso told reporters on Friday, stressing the new language was intended to remind the group's emerging-market members of the risk of manipulating currency moves.
What Japan did defend was language warning against "excessive volatility or disorderly movements," which Tokyo policymakers interpret as a tacit nod for them to step in to prevent sharp yen rises that hurt its export-reliant economy.
"If exchange rates must reflect economic fundamentals, we need to correct markets when currency moves deviate from fundamentals," the official said. "We had no reason to drop (the language)."
Another official said intervention won't be entirely ruled out if rapid yen moves persisted.
To be sure, the chance of currency intervention is low with the dollar around 109.54 yen on Friday, comfortably above the 100 level that markets see as Tokyo's line-in-the-sand.
But keeping markets on guard remains a priority for Japan, which has a long history of jawboning investors or directly intervening in currency markets to address unwelcome yen spikes.
The current market calm may have been the key reason the G20 policymakers decided to tweak the language in the first place, some Japanese policymakers say.
"No one is facing heated issues regarding currencies now. That made it easier to tweak the language," one of the official told Reuters on condition of anonymity because he was not authorised to comment publicly.