Japan warns 'all options' on table to counter yen moves
Japan yesterday ramped up its verbal warnings against the yen's rapid fall versus the US dollar, saying "all options" are on the table to prevent exchange rate volatility from dealing a blow to the economy.
After the yen plunged past 153 to a 34-year low against the dollar, Finance Minister Shunichi Suzuki said currency moves should be stable reflecting economic fundamentals, adding that the government is closely watching yen moves and factors behind them "with a high sense of urgency".
"We are not just looking at whether the yen passed 152 or 153, but also the background to it," Suzuki said. "We will take appropriate action against excessive volatility without ruling out all options."
Suzuki said he shares information "frequently" with Masato Kanda, Japan's top currency diplomat, over developments in the currency market.
Kanda, vice finance minister for international affairs, described the yen's fall as "rapid," but refrained from commenting on whether a move of one yen in a day is considered an excessive level that could trigger a fresh round of market intervention.
The latest verbal warnings came after the yen was put under renewed selling pressure versus the dollar as stronger-than-expected US inflation data scaled back market
expectations that the Federal Reserve will start cutting interest rates as soon as in June.
Caution over possible market intervention by Japan for the first time since 2022 grew after the remarks, with Japanese authorities having conducted one of their interventions that year to stem the yen's slide when the Japanese currently weakened to near 152 yen.
But the market reaction to the comments by the finance minister and the vice finance minister was limited, with the dollar remaining relatively firm against the Japanese currency.
Suzuki also said the yen's weakness can be both positive and negative, but he expressed concern about its impact on inflation amid a rising cost of living.
Japanese companies expect the dollar to trade at 141.42 yen for the year to March 2025, according to the latest Bank of J's Tankan survey.
The weaker yen has been one of the major reasons why Japan has seen the inflation rate elevated, raising import costs.
"Japan has been coping with rising prices. I'm always interested in and concerned about the impact of the weaker yen on inflation," Suzuki told a parliamentary session.
Despite the BOJ'S symbolic first rate increase in 17 years at its policy meeting in March, the yen has met continued selling pressure.
The currency's fall was fueled by receding expectations that the Fed will wait longer than expected until it starts cutting interest rates.
"The yen has moved to great extent since the beginning of this year," Kanda said.
Some market analysts say the yen's sharp drop could prompt another interest rate hike by the BOJ.
Governor Kazuo Ueda has said the Japanese central bank will not guide monetary policy to control foreign exchange rates but would consider a response if the impact of the yen's moves on the economy and prices cannot be ignored.
The wide interest rate gap between Japan and the United States has been blamed for the yen's depreciation.
The BOJ made a historic turn away from unorthodox monetary easing steps that had sharply weakened the Japanese currency but it plans to keep financial conditions "accommodative" to attain its 2 per cent inflation target, aided by robust wage growth that can help households withstand rising prices.
A weak yen cuts both ways for Japan. It boosts the overseas earnings of Japanese exporters in yen terms but it also inflates import costs, in a blow to resource-scarce Japan.