Japanese Finance Minister Signals Potential Intervention as Yen Declines Amid Speculative Market Moves

Japanese Finance Minister Voices Concerns Over Yen Declines

Japanese Finance Minister Shunichi Suzuki expressed concerns on Friday over what he described as "speculative" movements leading to the recent decline in the value of the yen. He indicated that the authorities were prepared to intervene in the market to address any excessive falls in the currency.

Monitoring the Speed of Yen's Movements

Suzuki highlighted that the authorities were closely monitoring the speed of the yen's fluctuations rather than just focusing on the levels. He reiterated Tokyo's stance of not ruling out any measures to counter disorderly movements in the currency market.

"The yen's continued declines, despite the narrowing interest rate gap, suggest speculative activities in the market," Suzuki conveyed to the parliament. He emphasized the importance of stable currency movements that reflect the underlying fundamentals, expressing concerns about excessive volatility.

Market Dynamics and Interest Rate Gap

With the Bank of Japan's policy rate remaining close to zero, analysts pointed out that expectations of the wide gap between U.S. and Japanese interest rates would persist, providing traders with a rationale to continue selling the yen. The recent decision by the Bank of Japan to end eight years of negative interest rates and scale back its radical stimulus program triggered the yen's downward trajectory.

The Japanese currency hit a 34-year low against the dollar at 151.975 earlier this week, following the BOJ's dovish guidance indicating a slow pace of future rate hikes. Despite some recovery, it stood at 151.35 on Friday.

Impacts of Yen's Depreciation

Traditionally, Japanese policymakers have favored a weaker yen as it benefits the country's major manufacturers. However, the substantial decline in the yen's value has raised concerns in Tokyo due to its inflationary impact on the cost of importing raw materials, which has adversely affected consumer spending and retail profits.