The dollar fell below 150 again, increasing the risk of intervention by the government on the currency market. This increased pressure on the Bank of Japan for it to adjust its monetary policy.
The currency was trading in the same range as last year, when the authorities entered the market. BOJ policymakers have also noted the weakness, and will decide next week whether to adjust a policy that has been weighing on the yen over years.
Shunichi Suzuki , Finance Minister Shunichi Suzuki stated that he is watching currency market movements with a continuing sense of urgency. This language suggests a strong level of concern and is in line with previous comments. warned that rapid currency movements are not desirable. He refused to comment on the topic intervention.
Koji Fukaya is a fellow with Market Risk Advisory, Tokyo. He said that the persistent weakness of the yen also puts pressure on the BOJ to change its policy, including raising the yield-curve ceiling, removing YCC, or ending the negative policy rate. He said that for the time being, the yen’s weakness is likely to be contained by the intervention risk and yield gap.
In September and October of last year, Japan spent about Y=9 trillion (60 billion dollars) on three occasions to support the yen. This was their first intervention since 1998. This year, the currency has fallen almost 13% versus the dollar. It is the worst performing currency in the Group of 10.
At 4:13 pm in Tokyo, the yen was down 0.2% to 150.48 after moving earlier between 149.96 – 150.78. This is this year’s lowest point. The sharp drop in the yen earlier this month, when it reached 150.16, fueled speculation that Japan had entered the market.
Officials did not confirm or deny whether they supported the yen during that period. Masato Kanda, the nation’s chief currency official, has said that Japan will take appropriate measures if excessive movements are seen on currency markets.
Fukaya says that although the dollar-yen’s volatility over the past week on Wednesday was at its lowest since December 2019, it may not be enough to deter Japan from taking action.
He said that the authorities had changed their definition of excessive movements. The Finance Minister stated earlier in the month that currency movements with a one-directional, gradual nature could be considered as excessive.
The yield on the US 10-year Treasury has returned to 5% compared with 0.88% in Japan.
Nikkei reported on the weekend that BOJ official were debating whether to adjust yield curve control as long-term Japanese interest rates rise in line with US ones. It did not say where the information came from.