Japan hints at intervention after yen hits 10-month low

The yen fell to a 10-month low against the dollar, even after Japan issued the strongest warning about sharp currency movements in recent weeks, increasing the likelihood of government intervention again if the decline continues.

The country’s top currency official said that there are moves aimed at speculating in the foreign exchange market, warning that Tokyo is ready to take further measures if necessary. “If these moves continue, the government will deal with them appropriately without ruling out any options,”explained Masato Kanda, Japan’s deputy finance minister for international affairs.

Kanda’s comments today briefly supported the yen, before it returned to its previous position, and then continued volatile trading, rising by about 0.3% against the dollar at 2.15 pm Tokyo time from Tuesday’s closing level of 147.34, as traders assessed the risks of Japan entering the market for the first time since October last year.

“It is important that the dollar moves against the yen from 146 to almost 148 within a trading day, and policymakers have defined excessive volatility as large two-to three-digit moves in one day,” said David Forrester, senior foreign exchange market strategist at Credit Agricole CIB corporate and investment bank in Singapore.

Kanda said that currencies should move stably in the market reflecting fundamental economic factors, noting that there are rapid movements this year similar to what happened in 2022 .

Officials are closely monitoring the market, especially as these developments raise uncertainty for companies and households, which negatively affects the economy,”he added.

The yen’s decline came today, as the US currency strengthened its position against major currencies amid a sell-off in Treasury bonds.

The position of Japanese monetary policy contributes to the weakening of the country’s currency. While the Federal Reserve is approaching the end of the cycle of boldly raising interest rates to combat the strongest inflation in decades, the Bank of Japan is firmly sticking to the last remaining negative interest rate among major central banks.