Record Low Yen in 34 Years... Japan Says "Will Respond Without Excluding Any Means"

Impact of Retreating US Interest Rate Cut Outlook

As the yen-dollar exchange rate surged to the 153-yen level for the first time in 34 years, accelerating the yen's depreciation, Japanese authorities hinted at the possibility of intervening in the foreign exchange market on the 11th, stating they "will not rule out any measures and will respond appropriately to excessive movements."

According to the Nihon Keizai Shimbun and others, Masato Kanda, Director-General of the Japanese Ministry of Finance, said in a meeting with reporters that morning, "Regardless of whether we intervene in the foreign exchange market, we are always prepared for all situations."

Director-General Kanda also pointed out, "While we do not judge based on a specific level, excessive (exchange rate) fluctuations have an adverse effect on the national economy."

On the same day, Finance Minister Shunichi Suzuki also said, "We will not rule out any options and will respond appropriately to excessive movements," adding, "We frequently communicate with the Director-General and share information. We are analyzing not only the numbers such as reaching 152 yen and 153 yen but also the background." He continued, "We are watching the (exchange rate) movements with high tension, including the background."

On the 10th (local time), the US March Consumer Price Index (CPI) was recorded at 3.5%, exceeding market expectations, pushing the yen-dollar exchange rate past 152 yen. It temporarily rose to the 153.2 yen level, marking the highest point since June 1990.

The Nihon Keizai Shimbun explained that the yen depreciated as the US CPI increase exceeded expectations, reducing hopes that the Federal Reserve (Fed) would lower interest rates early.

Masafumi Yamamoto, Senior Foreign Exchange Strategist at Mizuho Securities, said, "If the US March Producer Price Index (PPI), announced on the 11th, also rises, the yen rate is likely to fall to the 154 yen level," adding, "If the upward trend in US economic indicators continues, the lower limit of the yen exchange rate from April to June is expected to be in the 155 yen range." He further noted, "If the volatility of the yen rate increases further, it would not be surprising for the authorities to intervene, but unlike in 2022, it seems unlikely that the intervention will have an effect in curbing the yen's depreciation, so it is unclear how strong the authorities' willingness to intervene is."

At around 1:30 p.m. on the same day, the yen-dollar exchange rate was fluctuating around the 152.9 yen level.