TOKYO – The Japanese government said today it stood poised to intervene in the currency markets if the yen continues its rapid depreciation owing to “one-sided” currency moves.
The Japanese yen hit a fresh 24-year low against the US dollar on Monday leading to Japan’s Finance Minister Shunichi Suzuki calling for stability in currency markets, saying yen moves should be stable and reflect economic fundamentals.
“Recent moves are rather rapid and one-sided. We need to be watching developments with strong interest,” Suzuki told a press briefing.
Japan’s top government spokesman, chief cabinet secretary Hirokazu Matsuno, meanwhile, expressed “concern” about the yen’s fall.
He told a regular press briefing that Japan is ready to take action if recent trends continue, without explaining further.
“We are concerned about recent rapid, one-sided moves. If such moves continue, we will take necessary action,” Matsuno said.
The dollar was trading in the upper 143 yen range this morning, levels not seen since 1998, dealers here said.
The US Federal Reserve’s aggressive interest rate hikes to combat inflation and the likelihood the policy will continue into next year have led to the yen being dumped for the US dollar.
Conversely, the Bank of Japan (BOJ) has stayed committed to its ultra-loose monetary policy, setting its short-term benchmark interest rates at minus 0.1%, while continuing to guide 10-year Japanese government bond yields to around 0%.
The BOJ’s dovish policy stance has seen the gap in interest rates between Japan and the US widen, which has triggered US dollar buying and the yen’s weakness, and is causing volatility in the stock market here.
A weak yen, on the one hand, is a boon for Japan’s export-led economy, as profits from exporters made overseas get a boost when repatriated and price competitiveness is enhanced in foreign markets when the yen is weaker than its major counterparts.
However, a protracted weak yen further inflates already rising prices for energy and raw material products, essential for resource-poor Japan to continually import, which ultimately will further hurt Japan’s already negative trade balance and broader economy. – Bernama, September 7, 2022
