Yen slides to 20-year low against dollar
TOKYO: Japanese Finance Minister Shunichi Suzuki said yesterday sharp currency moves were “very problematic”, escalating his warning against excessive yen declines following the currency’s slide to a two-decade low against the dollar.
Suzuki made the remarks to reporters after the yen’s fall below 126 to the dollar, which marks the first break below that level since 2002. His comments were stronger than his warning earlier yesterday that rapid moves in the yen were “undesirable” and that authorities were watching currency moves carefully.
Government spokesman Hirokazu Matsuno said “the stability of exchange rates is important and we see rapid currency moves as undesirable”.
“We will monitor trends in the foreign currency market and the impact on the Japanese economy with a sense of urgency,” he added.
“The Japanese yen has been one of the weakest currencies anywhere in the world this year,” Dutch banking group ING said in a recent commentary.
“Driving the rally has been the perfect storm of a hawkish Federal Reserve, a dovish Bank of Japan, and Japan’s negative terms of trade shock as a major fossil fuel importer.”
The yen had already lost 10% of its value against the dollar in 2021 after four years of steady strengthening.
Swiss Bank UBS said a weaker yen would likely hit Japanese households’ purchasing power, and domestic-oriented small businesses who will face higher import costs.
Separately, BOJ governor Haruhiko Kuroda warned yesterday the recent rise in inflation driven by higher import costs could hurt the economy, stressing the central bank’s resolve to keep monetary policy ultra-loose.
Consumer inflation is likely to clearly accelerate as energy prices rise sharply and companies steadily pass on higher raw material costs to households, Kuroda said.
While the BOJ chief said the world’s thirdlargest economy was expected to recover as
consumption shows signs of improvement, and robust overseas demand underpin exports, he also warned of risks.
“The outlook, however, remains highly uncertain due to the impact of the pandemic, as well as developments regarding Ukraine and the impact on commodity prices,” Kuroda said in a speech to an annual meeting of trust banks.
He stressed the need to maintain the BOJ’s massive stimulus to support an economy yet to recover to pre-pandemic levels.