By Kentaro Sugiyama and Leika Kihara
TOKYO (Reuters) – Japanese authorities will take necessary measures on the currency front, Finance Minister Shunichi Suzuki said on Thursday, signaling a willingness to intervene in the foreign exchange market after the yen fell to a new 38-year low against the dollar has fallen.
“It is desirable for exchange rates to move stably. Rapid, one-sided movements are undesirable. Above all, we are very concerned about the effect on the economy,” Suzuki told reporters.
“We are monitoring the moves with a great sense of urgency, analyzing the factors behind the moves and will take necessary action,” he said.
Chief Cabinet Secretary Yoshimasa Hayashi also told a news conference Thursday that Tokyo will take “appropriate” action against excessive currency movements. He declined to comment on yen levels and whether authorities would intervene.
The yen stood at 160.52 per dollar on Thursday, just shy of a 38-year low of 160.88 reached on Wednesday.
Japanese authorities are facing renewed pressure to stem sharp declines in the yen, which has fallen 12% against the dollar so far this year, as traders focus on the wide interest rate differential between Japan and the United States.
The yen’s rapid decline below the key level of 160 per dollar increases market alarm over the likelihood of an impending yen purchasing intervention.
“At this point, authorities are probably starting to worry not just about the speed, but also about the level,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities, in a research note. “Unless they act, there is a risk that the yen will slide towards 162.”
But analysts doubt whether bafflement, or even intervention, can stem the yen’s weak tide, which is mainly caused by uncertainty about how soon the US Federal Reserve will start cutting rates.
The Bank of Japan has dropped signals of an impending rate hike, although any increase from the current near-zero short-term target will still keep Japan’s borrowing costs very low.
Still, the yen’s decline could increase pressure on the BOJ to accompany a planned announcement of a quantitative tightening (QT) plan with a rate hike at its next policy meeting on July 30-31, some analysts say.
Economy Minister Yoshitaka Shindo said Thursday after a meeting to approve the government’s monthly economic report that policymakers should be vigilant against the risk that a soft yen will push up inflation due to rising import costs.
“A weak yen is one of the factors pushing up inflation, so we will closely monitor the currency’s movements in guiding monetary policy,” BOJ Deputy Governor Shinichi Uchida said at the meeting , according to a Cabinet official who briefed reporters on the impact of inflation. discussions.
Tokyo spent 9.8 trillion yen ($61 billion) on foreign exchange market interventions in late April and early May after Japan’s currency hit a 34-year low of 160.245 per dollar on April 29.
($1 = 160.4800 yen)
