Japan’s finance minister issues strongest warning on yen weakness

Japan’s finance minister issued his strongest warning to date about the weakness of the yen as the currency fell to a 34-year low against the dollar, saying authorities could take “decisive steps”, language previously used before intervention. Shunichi Suzuki last used the words “decisive steps” in autumn 2022 when Japan last intervened in the market to stem the yen weakness.

Suzuki made the remarks on Tuesday shortly after the dollar spiked on strong US data, nudging the Japanese yen to a 34-year low and into the zone that drew official market intervention in 2022.

The yen traded at 151.97 per dollar in the Asia session, down about 0.2 percent and weaker than 151.94 where Japanese authorities stepped in during October 2022 to buy the currency. It hit the weakest level since the middle of 1990, around the time Japan’s asset bubble burst. Suzuki said the government is closely watching market moves with a high sense of urgency following the yen’s fall.

Earlier, The dollar climbed in the wake of more strong US economic data, nudging the Japanese yen to a 34year low and into the zone that drew official market intervention in 2022.

The yen traded at 151.97 per dollar in the Asia session, down about 0.2 percent and weaker than 151.94 where Japanese authorities stepped in during October 2022 to buy the currency and its weakest level since the middle of 1990.

For the quarter ending later this week the yen is the worst-performing major, down more than 7 percent on the dollar even after Japan’s exit last week from negative interest rates. Officials have been making near daily warnings against speculative moves and markets are jittery about a test of 152 per dollar as Finance Minister Shunichi Suzuki said Japan won’t rule out any steps if it thinks the yen is falling too fast.

“The market is very sensitive to the 152 area,” said National Australia Bank strategist Rodrigo Catril. “If we were to break that level then recent history would suggest that intervention would be much more likely.”

BOJ policymaker Naoki Tamura said the central bank must proceed slowly but steadily toward normalising its policies - seemingly giving the yen a little push weaker. The move set the dollar higher more broadly, with the Chinese yuan and New Zealand dollar sold very close to four-month lows. The yuan weakened to 7.2285 per dollar despite a strong fix of its trading band by the central bank.

Australian data published in the morning showed inflation holding at a two-year low of 3.4 percent in February, reinforcing market wagers that the next move in interest rates would be down. The Aussie slipped 0.3 percent to $0.6515. It is down 4.4 percent for the quarter. Other moves in Asia were kept in check as markets wait for Friday’s release of US core inflation data. Overnight data showed a bigger-than-expected jump in US durable goods orders in February.

Meanwhile, Japan’s business-tobusiness service prices continued to rise steadily but a key measure of trend inflation slowed in February, painting a mixed picture on the price outlook that may complicate the central bank’s interest rate hike path. The services producer price index, which measures what companies charge each other for services, rose 2.1 percent in February from a year earlier, data showed on Tuesday, unchanged from January in a sign companies continued to pass on labour costs thanks to prospects for sustained wage gains.