Japanese government steps in to support yen crater
Japan’s finance ministry said on Thursday it had intervened in the foreign exchange market to support the yen, which has fallen against the dollar in recent months due to the widening policy gap between the US and Japanese central banks. .
It was the first government intervention to support the currency since 1998 and came after the dollar surged to nearly 146 yen earlier in the day.
The yen has been weakening against the dollar for months, but fell further on Thursday after the US Federal Reserve raised rates again to tame inflation, while the Bank of Japan left its ultra monetary policy in place. – accommodating.
“There have been rapid and unilateral developments due to speculative movements in the foreign exchange market,” Japan’s Vice Finance Minister for International Affairs Masato Kanda said Thursday evening.
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“The government is concerned about these excessive fluctuations and has just taken decisive action,” he added, confirming that it was an intervention.
His remarks saw the yen pare most of its losses, with the dollar falling as low as 140.70 yen.
Inflation in Japan is on the rise, with the consumer price index in August at 2.8%, its highest level since 2014, but the central bank sees the increases as temporary.
In his policy statement on Thursday, he said he would leave his current policy in place, “aimed at achieving the price stability target of 2%, for as long as necessary.”
“It will continue to expand the monetary base until the observed year-on-year rate of increase in the CPI exceeds 2% and stays above the target in a stable manner.”
The bank said it saw the Japanese economy as on the road to recovery, “with the impact of Covid-19 and diminishing supply-side constraints”, although it warned against the uncertainty of commodity price increases linked to the war in Ukraine.
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The rapid depreciation of the yen has raised concerns in Japan, pushing up the cost of imported goods for consumers and businesses.
“The BoJ has no choice”
Earlier this month, the central bank reportedly carried out a “rate check”, an operation often seen as a precursor to currency intervention.
The move came shortly after the yen nearly breached the psychologically significant 145 barrier, and reports of the trade temporarily bolstered Japanese unity.
It plunged from around 115 in March, and the BoJ reiterated on Thursday that “due attention needs to be paid to developments in financial and foreign exchange markets and their impact on economic activity and world prices. Japan”.
Governor Haruhiko Kuroda, whose term expires next year, told reporters ahead of the announcement of the intervention that the bank would stick to its longstanding agenda.
“We haven’t and won’t target certain currency levels,” he said.
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“It is desirable that exchange rates reflect economic and financial fundamentals, but the recent rapid depreciation of the yen is not that and is negative for the economy,” he added.
He noted, however, that the dollar had appreciated against most major currencies.
The BoJ is hardly expected to change course, Shigeto Nagai, head of Japan’s economy at Oxford Economics, wrote in a note.
“While foreign investors may continue to challenge yen and (Japanese government bond) yields until the Fed’s rate-tightening cycle peaks, we believe the BoJ has no d no choice but to stick to the current policy…”.
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