Azumi spurns calls for BOJ to buy foreign bonds to curb yen

Japan Finance Minister Jun Azumi gestures while answering questions during a news conference after the 15th ASEAN plus 3 Finance Ministers and Central Bank Governors' meeting in Manila May 3, 2012.

TOKYO (Reuters) - Japanese Finance Minister Jun Azumi on Wednesday shrugged off calls for the Bank of Japan to buy foreign bonds to help weaken the yen, arguing that doing so would breach the finance ministry's jurisdiction on exchange rate policy.

But Azumi stressed he was not ruling out any measure to counter excessive yen appreciation, repeating his threat of yen-selling intervention as the currency hit a fresh two-month high.

"For currency intervention, coordination with authorities of other countries is essential. That is why the finance minister should be solely responsible for this," Azumi told parliament on Wednesday.

"It would be inappropriate for the BOJ to buy foreign assets as a substitute for currency intervention," he said.

Some lawmakers have argued that the BOJ, left with few policy options to spur growth, should buy foreign bonds to directly weaken the yen and help the export-reliant economy.

Expectations that such moves may be discussed as an option heightened after Takehiro Sato, one of the two new members of the BOJ's board, said last month that purchasing foreign bonds could be a future option as long as the central bank made it clear that it was providing liquidity and not trying to manipulate currencies.

Azumi ruled out the possibility for the first time since the new board member made the comment, saying that it would be equivalent to currency intervention and would break a law giving the finance ministry jurisdiction on exchange-rate policy.

Kazuo Momma, a BOJ executive director in charge of overseeing monetary policy, also told parliament on Wednesday that buying foreign bonds cannot be considered as a monetary policy option if it was aimed at affecting currency rates.

Under the current law, the finance ministry is authorized to decide when to intervene in the currency market. The BOJ acts as the ministry's agent and steps into the market on its behalf.

"I am always saying I don't rule out every possible step against excessive yen moves. I'm ready to do what needs to be done," Azumi told reporters on the same day.

The dollar hit a two-month low against the yen, falling as low as 77.90 yen on trading platform EBS, its lowest level since June 1, adding to headaches for policymakers worried about the pain on the fragile economy from slowing global demand and persistent yen rises. <FRX/>

The BOJ has kept interest rates virtually at zero and eased monetary policy via an increase in asset purchases in February and April.

It has held off on additional easing since then and is expected to keep policy on hold at its rate review next week unless the yen spikes enough to threaten the economy's recovery prospects.

(Editing by Eric Meijer)