Japan: "Measures Against Excessive Yen Exchange Rate Fluctuations"

Masato Kanda, Director-General of the Japanese Ministry of Finance, stated that appropriate measures will be taken if there is excessive volatility or deviation from fundamentals in the yen exchange rate.

According to the Nihon Keizai Shimbun, on the 7th, Director-General Kanda said, "Efforts to maintain the credibility of the yen in the medium to long term are necessary."

[Image source=Yonhap News]

The market believes that the Japanese government and the Bank of Japan (BOJ) intervened in the yen exchange rate on April 29 and May 2. The Japanese government did not disclose whether it intervened. Regarding this, Director-General Kanda said, "It is not common to comment on movements called interventions," adding, "The intervention in September 2022 was an exceptional announcement as it was the first intervention in decades."

Major foreign media, citing BOJ data, estimated that Japanese authorities recently spent more than 9 trillion yen (approximately 79 trillion won) defending the currency.

Hideo Kumano, Chief Economist at Dai-ichi Life Research Institute, commented on Director-General Kanda’s remarks, saying, "The authorities are reluctant to intervene in the currency market considering the limited available dollar cash reserves and the fact that U.S. Treasury Secretary Janet Yellen said such measures (intervention) are only allowed in very rare cases." He added, "This could be an early verbal warning indicating a desire to keep the yen-dollar exchange rate fixed in the low 150 yen range until around the 15th, when U.S. consumer price index data will be released."

The previous day, Secretary Yellen said, "I think the intervention is a rumor," and added, "Intervention is expected to be rare, and I hope consultations with the U.S. will take place."

Marito Ueda, Head of Market Research at SBI Liquidity Market, said, "Since the 2022 intervention, the yen has strengthened smoothly, but this time it may be more difficult." He explained, "At that time, there was speculation that U.S. interest rate hikes had ended, and the outlook for monetary policy was not as uncertain as it is now. Another test of the yen-dollar exchange rate breaking through 160 yen is possible."

At around 3:20 p.m. that day, the yen-dollar exchange rate was moving in the 154 yen range. A decline in the yen-dollar exchange rate means an appreciation of the yen.