Japan is scrutinizing foreign exchange moves with “an extremely strong sense of urgency,” Finance Minister Shunichi Suzuki said Friday, after the yen fell beyond the 145 mark against the U.S. dollar despite concern in the market that authorities may intervene.
The government will respond “appropriately” to excessive volatility, Suzuki said, calling recent currency moves “rapid and one-sided.”
Japanese authorities intervened in the currency market last year after the yen fell to the 145 zone, though its yen-buying, dollar-selling operation, the first in about a quarter century, failed to reverse the broader trend of the yen’s weakness.
“We have seen rapid and one-sided currency moves recently,”
Suzuki told a press conference. “The government is monitoring developments in the currency market closely.”
Japanese officials have repeatedly emphasized that foreign exchange rates should move predictably, reflecting economic and financial fundamentals.
Suzuki declined to comment on whether the yen’s recent weakening is based on such fundamentals or has been driven by speculators.
On Friday, the dollar briefly rose above the 145 yen line, seen as psychologically important, reaching a level not seen since last November.
The yen’s depreciation, both relative to the dollar and euro, came as financial markets price in the diverging monetary policy paths and widening interest rate gap between Japan and the United States and Europe. The Bank of Japan is the most dovish central bank and remains unmoved by a global trend of monetary tightening.
A weak yen cuts both ways for Japan. It boosts exporters’ overseas profits in yen terms but also inflates import costs, dealing a blow to the resource-scarce nation.
The yen’s precipitous drop last year is, to a large degree, responsible for pushing up import costs and accelerating inflation.
Suzuki did not say whether a weak yen is positive or negative for the Japanese economy. “But our policy priority now is on coping with rising prices. In this sense, the current situation is not favorable for that policy objective.”
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