Japan finance chief vows "decisive steps" if yen weakens excessively
TOKYO, March 27 Kyodo - Japan will take "decisive steps" to stem excessive weakness in the yen, Finance Minister Shunichi Suzuki said Wednesday, after the currency fell to a 34-year low against the U.S. dollar despite the Bank of Japan's first interest rate hike in 17 years last week.
Suzuki told reporters that appropriate action would be taken "without excluding any options" to cope with excessive moves in the yen, driving speculation that the government may intervene in the currency market for the first time since late 2022.
He also said Japan will closely monitor developments in the foreign exchange market with a "high sense of urgency," while Chief Cabinet Secretary Yoshimasa Hayashi, the top government spokesman, told reporters that excessive currency moves are "undesirable."
Suzuki's remarks came after the yen briefly sank to 151.97 against the dollar in Tokyo on Wednesday. The Japanese currency last plunged to 151.94 in October 2022, before Japan stepped into the market by buying the yen for the dollar.
The phrase "decisive steps" is regarded as one of the strongest warnings to investors when the yen is excessively fluctuating as it is frequently used by the finance minister before the government intervenes in the foreign exchange market.
Later Wednesday, officials from the Finance Ministry, the Financial Services Agency and the BOJ held a meeting to discuss financial market conditions, with Japan's top currency diplomat, Masato Kanda, in attendance.
News of the gathering sparked caution among investors regarding potential intervention, leading to an appreciation of the yen against the dollar.
Kanda, vice finance minister for international affairs, told reporters after the meeting that his ministry will take "all possible measures" to curb excessive moves in the yen, without ruling out the possibility of intervening in the market.
"It is obvious that speculative moves are behind the yen's depreciation," Kanda added.
If the government does decide to intervene in the currency market, the BOJ, as ordered by the Finance Ministry, would sell dollar-denominated assets it holds, such as U.S. Treasuries, to buy the yen, dealers said.
At a parliamentary session, meanwhile, BOJ chief Kazuo Ueda said the central bank is "closely" watching the impact of the yen's movements on the economy and prices, but he declined to comment on currency market moves.
On March 19, the BOJ scrapped its negative interest rate policy in its first rate hike since 2007, overhauling the central bank's unorthodox monetary easing framework that had been implemented over the past decade to fight deflation.
The central bank, however, pledged to maintain monetary easing for a while, prompting market participants to assume that the interest rate gap between Japan and the United States is unlikely to shrink sharply.
Earlier in the day, BOJ board member Naoki Tamura said short-term interest rates would remain near zero for the time being, while the market is expecting the U.S. Federal Reserve to go ahead with three rate cuts this year.
The yen tumbled toward the 152 line against the dollar, as his comment strengthened market expectations that BOJ will maintain its accommodative stance.
Since the late Shinzo Abe became Japan's prime minister in December 2012, the yen has been on a downward trend due largely to his economic policy, dubbed "Abenomics," which included drastic monetary easing, massive fiscal spending and a growth strategy.
A falling yen is usually a boon for exporters as revenue from Japanese-made products sold overseas is inflated in yen terms, but it also drives up import prices and Japan depends on imports for more than 90 percent of its energy needs.
Japan's core consumer price index, excluding volatile fresh food, rose 2.8 percent in February from a year earlier, above the BOJ's 2 percent target for the 23rd straight month, government data showed late last week.
Amid the yen's rapid depreciation, Japan spent over 9 trillion yen ($59.2 billion) on three yen-buying, dollar-selling operations in 2022. The one on Sept. 22 was the first yen-buying intervention in 24 years as the currency crossed 145 to the dollar.
Although currency analysts raised questions about the lasting effects of such operations in the market, Japan also carried out "stealth" foreign exchange interventions on Oct. 21 and 24 in 2022.
==Kyodo
