Tokyo (Reuters) – Japan’s three main monetary authorities held an emergency meeting on Wednesday (26) to discuss the weakening of the yen and suggested they were ready to intervene in the market to prevent what they described as disorderly and speculative movements in the coin.
In a sign of growing urgency to put a floor under the yen after the currency fell to a 34-year low against the dollar, the Bank of Japan (BoJ), the Ministry of Finance and the Financial Services Agency of the Japan held a meeting in Tokyo.
In a later briefing, top currency diplomat Masato Kanda said he “will not rule out any measures to respond to disorderly currency movements.” Kanda also said the BoJ will respond through monetary policy if currency movements affect the economy and price trends.
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The dollar fell against the yen on news of the meeting and was at 151.06 yen after Kanda’s speeches. Earlier, the yen was at 151.97 per dollar, weaker than the 151.94 level under which Japanese authorities intervened in October 2022 to buy the currency.
The yen continued to lose ground despite a historic move by the central bank taking interest rates out of negative territory last week.
Consequences
A weaker yen makes exports from the world’s fourth-largest economy cheaper but could raise the prices of energy and other Japanese imports, fueling inflation and raising the cost of living.
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This undermines the central bank’s objective of achieving a sustainable 2% inflation level through wage growth and increased household purchasing power, rather than cost-driven inflation.
Earlier, Finance Minister Shunichi Suzuki said authorities could take “decisive measures” against yen weakness – language he has not used since 2022, when Japan last intervened in the market. He made his speeches shortly after the dollar had soared due to strong data from the United States.
“We are now watching market movements with a great sense of urgency,” he told reporters.
Christopher Wong, currency strategist at OCBC in Singapore, said markets were cautiously testing to see where the limit is for Tokyo.
“I think the risk of intervention is quite high because this is a new bull cycle,” he said, adding that if Tokyo does not act, it would only encourage people to push the dollar/yen exchange rate too high in the coming days. .
The president of the Bank of Japan, Kazuo Ueda, said this Wednesday that the central bank will also keep an eye on exchange rate developments.
“Currency movements are among the factors that have a major impact on the economy and prices,” Ueda told Parliament when asked about the yen’s recent sharp falls.
