Japan will respond decisively to excessive FX moves, Finance Minister says

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Economy 33 minutes ago (Oct 18, 2022 12:10AM ET)

Daily News Japan will respond decisively to excessive FX moves, Finance Minister says© Reuters. FILE PHOTO: Banknotes of Japanese yen are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/Illustration/File Photo

By Tetsushi Kajimoto and Leika Kihara

TOKYO (Reuters) -Japanese Finance Minister Shunichi Suzuki warned on Tuesday Japan would take appropriate and decisive action against excessive currency moves driven by speculators, suggesting market intervention was possible after the yen fell to a fresh 32-year low.

Suzuki, speaking in parliament, pointed to Japan’s currency intervention last month when pressed by an opposition lawmaker on what a decisive response meant.

“We are closely watching market moves with a high sense of urgency. We will make an appropriate response decisively to excessive moves,” Suzuki said.

“We intervened in the currency market as a decisive measure (on September 22₎.”

The minister, speaking to reporters earlier on Tuesday, declined to comment when asked whether authorities were conducting stealth intervention to support the weakening currency.

The yen slipped to 149.10 to the dollar before the start of Asia trade on Tuesday, its weakest since August 1990, putting the major psychological barrier of 150 in focus.

Policymakers, who once focused on yen strength as a source of concern for the trade-oriented economy, are now worried that the yen’s sharp fall is boosting already high commodity import costs, squeezing households, and upending business plans.

Authorities have fired verbal warnings against the yen’s descent almost daily since early September, when it reached 144 to the dollar as rate hikes by the Federal Reserve boosted the U.S. currency.

Suzuki first acknowledged yen weakness as negative for the economy in April, when it was trading around 126 per dollar. It has continued to fall sharply and is down about 20% since the start of the year.

At Tuesday’s parliamentary session, Prime Minister Fumio Kishida joined in warning that rapid, speculation-driven currency moves were problematic.

Kishida brushed aside the dominant market view that the Bank of Japan’s ultra-easy monetary policy was largely behind the yen’s sharp declines, saying that currency rates move on various factors, not just on U.S.-Japan interest rate differentials.

“The Bank of Japan decides monetary policy based not just on currency moves but comprehensive factors, such as economic and price developments as well as the impact on small and midsize firms,” Kishida said.

BOJ Governor Haruhiko Kuroda, who was also appearing in parliament after attending meetings of global financial leaders in Washington last week, suggested that the dollar’s strength may not persist.

“The dollar has become very strong against all currencies around the world,” Kuroda said. “But few of the people I met in Washington were thinking that it would last long.”

Japan spent 2.8 trillion yen ($18.81 billion) in dollar-selling, yen-buying intervention last month when authorities acted in the markets to prop up the yen for the first time since 1998.

Market players have speculated that authorities may have intervened in the market since then without public announcements or acknowledgement.

“Generally speaking, there are times when we intervene by making announcements and some other times when we do without it,” Suzuki told reporters on Tuesday. He did not comment further on the matter.

($1 = 148.8400 yen)

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