YEN’S RAPID DECLINE RAISES “SERIOUS CONCERNS” IN JAPAN

Wed 26 June 2024:

Japanese authorities are “seriously concerned and on high alert” about the yen’s rapid decline, stated the top currency diplomat, Masato Kanda, as the currency reached its weakest level in almost 40 years.

“It is generally accepted that the current weakness in the yen is not necessarily justified and is believed to be driven by speculators,” Kanda, vice finance minister for international affairs, told reporters on Wednesday.

The weakening yen is problematic for Japanese policymakers, increasing the cost of imported raw materials, pushing up inflation, and hurting consumption.

Kanda noted that the currency’s recent movements were rapid and “definitely one-sided,” marking a shift from his recent stance of avoiding comments on the ongoing market situation.

“We have been preparing to act against excessive volatility,” Kanda said, signaling readiness for another intervention to support the yen.

Despite Kanda’s warnings, the yen continued its downturn, hitting 160.50 per dollar, its weakest in about 38 years.

While the market has viewed 160 yen to the dollar as a critical threshold, Kanda and other officials have insisted they have no specific levels in mind for intervention.

Japan spent 9.8 trillion yen ($61.6 billion) intervening in the foreign exchange market in April and May after the yen hit a 34-year low of 160.245 per dollar on April 29. However, these measures failed to reverse the yen’s weakness, partly due to a delay in U.S. Federal Reserve interest rate cuts, maintaining a wide U.S.-Japan interest rate differential.

Meanwhile, the Bank of Japan is hinting that its quantitative tightening (QT) plan in July could be more significant than anticipated and may include an interest rate hike, as it gradually withdraws from its extensive monetary stimulus.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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