“Versus the Japanese Yen, the US Dollar regained ¥1 from its 18-month low of ¥109.40 after Yasuo Fukuda, prime minister of Japan since the administration of Shinzo Abe collapsed in Sept., warned currency speculators to “be careful” of backing the Yen to rise.

“In the short term, Yen appreciation would certainly be a problem,” Fukuda told the Financial Times. “Any kind of sudden change in exchange rates would not be desirable.

Pointing to the Yen’s sudden 18-month highs against the Dollar, “it really is a reflection of the state of the US economy,” he went on. “What we can do is limited. But speculative movements, I believe, need to be held in check.

“What I am saying is be careful so that [intervention] will not happen.”

Japan now holds $893 billion in foreign currency reserves, much of it in US Dollars. Between 2001 and 2006, Tokyo poured $420 billion into the currency markets, selling Yen in a bid to push it lower.

According to The Economist‘s Big Mac Index of purchasing power, the Yen remains more than 25% under-valued today. The British Pound, on the other hand, is now around 22% over-valued against the US Dollar – and yet the cost of living for British consumers continues to rise regardless, driven by near-zero rates of real interest paid on bank savings after tax and inflation.”

Adrian Ash at Bullion Vault.