Bank of Japan to 'Check Exchange Rate Quotes' with Market Participants... Likely to Intervene

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The Bank of Japan (BOJ) conducted a "currency rate check" on the 14th, asking market participants about the exchange rate level, and it appears to be preparing to intervene in the foreign exchange market, reported Japan's Nihon Keizai Shimbun on the 14th.

Nihon Keizai cited multiple sources saying that by inquiring about exchange rate trends, the BOJ seems to be preparing for currency intervention. On that day, the yen-dollar exchange rate surged to around 144.9 yen at one point. In response, Japanese Finance Minister Suzuki Shunichi stated that all measures would be used against the yen's weakness and left open the possibility of intervention in the foreign exchange market.

The yen-dollar exchange rate rose more than 30 yen in half a year from the early March level of around 114 yen per dollar. On an annual basis, Nihon Keizai reported that the depreciation rate of the yen is the largest since the shift to a floating exchange rate system in 1973. While the U.S. Federal Reserve (Fed) has rapidly raised interest rates in response to soaring inflation, Japan has maintained a large-scale monetary easing policy, and the widening interest rate gap between the two countries is also impacting the exchange rate.

Nihon Keizai stated, "There are barriers if the government and BOJ actually intervene in the exchange rate," noting that since the U.S. side welcomes a strong dollar, it is difficult to use the method of selling dollars and buying yen together with the U.S., and Japan acting alone to buy yen has limited effectiveness.