Japanese 1,000 yen, 5,000 yen and 10,000 yen banknotes stacked in Kyoto, Japan, on Thursday, November 2, 2023. Contradictions in Japan’s efforts to guard the yen while slowing the speed of rise in bond yields have gotten increasingly apparent across currencies. and debt markets. Photographer: Kentaro Takahashi/Bloomberg via Getty Images
Kentaro Takahashi| Bloomberg | Getty Images
The yen hit a 34-year low on Wednesday, weakening as little as 151.97 against the U.S. dollar and fueling market questions about potential government intervention to support the Japanese currency.
The yen was last at 151.22 per dollar at 10:19 a.m. London time, after paring some losses.
The Japanese currency hit its previous record low late last yr, when it fell to 151.95 against the dollar in October 2023.
Japanese yen
The currency’s weakness indicated to many investors that Japanese policymakers could step in to shore up the beleaguered currency. Japanese Finance Minister Shunichi Suzuki indicated that taking actions aimed toward “reacting to chaotic currency movements” had not been ruled out.
After the Bank of Japan’s meeting with the Finance Ministry and the Financial Services Agency, Masato Kanda, deputy finance minister for international affairs, said on Wednesday that the yen’s movements were being closely and closely watched, Reuters reported.
He added that recent fluctuations, which reached as much as 4% in two weeks, weren’t considered benign changes.
BOJ officials said that if foreign exchange developments were to affect Japan’s economy, the central bank would respond with monetary policy measures, Kanda noted.
Analysts suggest Suzuki’s comments and yen movements point to a greater likelihood of intervention, which might be fueled by further developments.
“There is now a greater likelihood of Japanese currency intervention. The catalyst may be another sharp rise in the USD/JPY rate in the near term,” Commonwealth Bank of Australia analysts said in a note on Wednesday.
A report by Bank of America Global Research said intervention was a “realistic option” for the Japanese government but may not solve long-term problems.
“Since the yen decline is the result of a combination of structural capital outflows and the elevated USD/JPY exchange rate, and not just speculation, currency intervention would not be a viable solution,” the report said.
Japan’s economy unexpectedly fell into a technical recession at the tip of 2023, after declining for 2 consecutive quarters. The data was later revised to indicate expansion and forestall a downturn. After many years of fighting deflation, the country now faces a recent fight against inflation. In a historic decision, the Bank of Japan ended its negative rate of interest policy and lifted its yield curve control policy earlier this month, triggering a sell-off within the yen.
Kanda has previously said that a weaker yen has its benefits and downsides. The currency’s weakness, for instance, boosted tourism and led to raised stock market performance.
