Japanese Finance Minister Shunichi Suzuki clarified on Tuesday that authorities are not fixated on specific absolute currency levels when considering market intervention.
During a news conference, Suzuki addressed inquiries about the government’s intervention stance, coinciding with the dollar surpassing the 145 yen threshold. This threshold had triggered Japan’s first yen-buying operation since 1998 back in September 2022.
Suzuki emphasized the importance of currency markets moving steadily in alignment with fundamentals. He stated that excessive volatility is undesirable, and stability is their fundamental stance. He added, “We’re observing market movements with a keen sense of urgency. We’ll respond appropriately to excessive fluctuations.”
When questioned whether breaching the 145 yen level would trigger intervention, Suzuki clarified, “We don’t intend to have any fixed numerical threshold or defend it when it’s exceeded.”
Suzuki elucidated that Japan’s assessment of intervention revolves around evaluating whether currency movements are speculative, volatile, or rooted in fundamentals, rather than focusing solely on absolute levels. He emphasized, “If speculative movements impact corporate future management plans or households, we will take necessary action.”
Japanese authorities rarely intervene to strengthen the currency, as they are concerned that a excessively strong yen could adversely impact vital exports and push Japanese manufacturers to shift overseas.
The last instance of Japan intervening through selling yen was in 2011, driven by concerns about a surge in the currency. The intervention aimed to prevent further deflation amidst the U.S. Federal Reserve’s quantitative easing measures.
In the present situation, Japan faces the risk of a weakening yen, diverging from major central banks that are aggressively tightening monetary policies.
Later on Tuesday, Japan’s top forex diplomat, Masato Kanda, expressed his intent to take appropriate measures against exaggerated currency fluctuations. Kanda, who supervised the country’s currency interventions in the previous year, highlighted his vigilance in monitoring the market with a high level of urgency.
