Written by Satoshi Kajimoto
TOKYO (Reuters) – Japan's three main currency authorities held an emergency meeting on Wednesday to discuss the weaker yen and signaled they were prepared to intervene in markets to stem disorderly and speculative movements in the currency.
In a sign of growing urgency to set a floor for the yen, the Bank of Japan, Ministry of Finance and Japan's Financial Services Agency met late in Tokyo trading hours as the yen fell to a 34-year low against the dollar. was held.
At a subsequent press conference, Masato Kanda, a leading expert on currency diplomacy, said, „We will not rule out any measures to deal with disorderly exchange movements.'' Kanda also said that if currency movements affect the economy or price trends, the Bank of Japan will respond through monetary policy.
The dollar fell against the yen on news of the meeting, last trading at 151.06 yen after Karita's remarks. The current exchange rate of the yen was 151.97 yen, which was weaker than the 151.94 yen level at which the Japanese authorities decided to intervene to buy the yen in October 2022.
The yen continues to fall despite the Bank of Japan's historic shift away from negative interest rates last week.
A weaker yen makes exports from the world's fourth-largest economy cheaper, but could push up the price of energy and other Japanese imports, fueling inflation and raising the cost of living.
This undermines the Bank of Japan's goal of achieving a sustainable 2% inflation level through wage increases and improvements in household purchasing power, rather than cost-push inflation.
Finance Minister Shunichi Suzuki said on the same day that authorities may take „decisive measures“ against the weaker yen, a phrase Japan has not used since its last market intervention in 2022. His remarks came just after the dollar soared on strong U.S. economic data.
„Currently, we are closely monitoring market trends with a high degree of nervousness,“ he told reporters.
Alvin Tan, head of Asian currency strategy at RBC Capital Markets, said the market was cautiously testing where Tokyo's boundaries were.
„This is a new cycle high, so I think the risk of intervention is pretty high,“ he said, adding that if Japan doesn't act, people will simply push the dollar/yen rate up significantly this year. Deaf added. Two or three days.
domino effect
Bank of Japan Governor Kazuo Ueda said on Wednesday that the BOJ will also keep a close eye on currency developments.
In response to a question about the recent rapid depreciation of the yen in parliament, Ueda said, „Forex movements are one of the factors that have a major impact on the economy and prices.''
Foreign exchange strategists at National Australia Bank (OTC:) say the ripples from the weaker yen are being felt in other countries, and the recent sharp depreciation could be a sign of a policy response to protect China's export competitiveness. He said there is.
„It's not just about the yen. There's a domino effect that creates downside risks for other currencies,“ said NAB strategist Rodrigo Catril.
The Bank of Japan last week raised interest rates for the first time since 2007, but markets now believe the next rate hike may be some time away.
This has encouraged the use of the yen in carry trades, where investors borrow in low-interest currencies and invest the proceeds in higher-yielding currencies. Japanese investors could also deprive the yen of support from repatriation and reap much larger profits overseas.
The yen performed worst among major currencies in the current quarter, which ends this weekend, losing more than 7% against the dollar.
(This article has been amended to correct quote attribution in paragraphs 10 and 11)