The unstoppable weakening of the yen… Japanese Finance Minister: “We will not rule out any means including exchange rate intervention”

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Finance Minister Kanda mentions “waiting” for measures such as market intervention
The impact of the interest rate gap between the U.S. and Japan is highlighted by Japan’s continued monetary easing.
Treasury says there was “no intervention” between September 28 and October 27

As the value of Japan’s yen continues to fall against the dollar, Finance Minister Masato Kanda (Vice Minister level) announced on the 1st, “We will not rule out all means and take appropriate action against excessive fluctuations in exchange rates,” including intervention in the exchange rate.

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According to local public broadcaster NHK and Nippon Keizai Shimbun (Nikkei), Finance Minister Kanda told reporters at the Ministry of Finance this morning, “We are concerned about unilateral and rapid (exchange rate) movements.”

When asked whether ‘all actions’ included market intervention, he said, “I won’t talk about that, but it is all means.” He revealed his control over the market.

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At the same time, in response to the question, “Are various situations, including intervention, on standby?” he answered, “It is standby.” “We will make a comprehensive judgment and look at the market situation with a sense of urgency,” he emphasized.

In the foreign exchange market, the value of the yen per dollar fell to the high 151 yen range from the night of the 31st of last month to the early morning of the 1st, Korean time. The weakening yen is accelerating.

Regarding the reason for the weak yen, Finance Minister Kanda said, “I think the biggest thing is speculation. When considered comprehensively, movements appear to be inconsistent with fundamentals. “Because it has a significant impact on people’s lives, we must take appropriate responses,” he emphasized.

Finance Minister Kanda said, “(The value of the yen) has been moving close to 25 yen since the beginning of the year. Recently, suen has been moving in a short period of time. “Fundamentals do not change by a few yen overnight,” he pointed out.

As of 10:16 am on this day, the yen is trading at 151.32 to 151.34 yen per dollar in the foreign exchange market.

On the 31st of last month, the Bank of Japan made changes to make some policies more flexible. However, in the New York market, there was widespread opinion that it was not a major correction and that monetary easing would continue.

Since the United States has recently received good economic indicators, there is growing speculation that high interest rates will continue for the time being. As the interest rate difference between the U.S. and Japan becomes more pronounced again, the movement to sell yen and buy dollars is intensifying in the Tokyo market.

However, the market is also wary of intervention by the government and the Bank of Japan.

A market official told NHK, “This morning (the 1st), Finance Minister Kanda made a statement to keep market movements in check. “There is also a growing sense of caution about market intervention by the government and the Bank of Japan,” he said.

Meanwhile, Japan’s Ministry of Finance announced on the 31st of last month that there was no exchange rate intervention from September 28 to October 27.

Initially, on the 3rd of last month (local time), in the New York foreign exchange market, the yen weakened rapidly and was recorded at 150 yen per dollar.

Afterwards, on the morning of October 4, the yen’s weakness calmed down, with the dollar trading at 147 yen per dollar.

As a result, speculation spread in the market that the government and the Bank of Japan may have intervened by purchasing yen and selling dollars.

Afterwards, on October 26, when the yen fell to the late 150 yen range per dollar, the yen strengthened rapidly to 149 yen. Even at this time, there was a view that the government and the Bank of Japan may have intervened.

As it became clear that there was no intervention by the government or the Bank of Japan despite these observations, there were voices in the market that algorithmic trading, which determines the timing of sales through computer analysis, may have affected the exchange rate.

Nikkei analyzed, “As it has been revealed that the government and the Bank of Japan did not intervene in the exchange rate, there is a possibility that the yen will weaken as market caution eases.”

In September and October of last year, the government and the Bank of Japan implemented exchange rate intervention by purchasing yen and selling dollars to respond to the sharp weakening of the yen. It has not been implemented since November 2022.

Source: Donga

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