(BFM Bourse) – The Japanese authorities confirm that they have intervened in the foreign exchange market to try to stem the fall of the yen, which is at its lowest levels in 32 years against the greenback. The Japanese currency is suffering from the growing gap between the still ultra-accommodative monetary policy of the Bank of Japan and a tightening of that of the Fed.
Japan intervened in the foreign exchange market in October to the tune of about $43 billion, Tokyo announced on Monday, as the yen moved to its lowest levels in 32 years against the greenback.
The intervention or interventions – which the Japanese government declined to confirm – totaled 6,349.9 billion yen between September 29 and October 27, the Japanese finance ministry said. Japan had already drawn nearly $20 billion from its foreign exchange reserves in September to support its currency, a first since 1998.
Yen at 30-year low against dollar
The yen has lost more than 20% of its value against the dollar since the start of the year due to the large gap between Japan’s ultra-accommodating monetary policy and the forced monetary tightening in the United States.
While the Japanese currency fell even further, falling to 151.95 yen for the dollar, its lowest since 1990, the yen had suddenly – and briefly – rebounded on October 21. Market participants had attributed this movement to a new intervention by the Japanese government to buy yen against dollars.
A similar rebound three days later also sparked speculation, but Japan’s Finance Minister Shunichi Suzuki merely repeated the government’s line: monitor the foreign exchange market and “respond appropriately to excessive speculator moves.” “.
“It’s strange that they refused to confirm the intervention,” Carol Kong, a foreign exchange specialist at the Commonwealth Bank of Australia, told AFP. “One possible reason is that the government wants to maintain secrecy, in the hope that it keeps traders uncertain, and that it weighs on the dollar,” she added. One dollar traded for 148.50 yen on Monday around 10 a.m. GMT.
The weakness of the yen, a strong point for Japanese companies
A weak yen is traditionally seen as a positive factor for large Japanese companies as it enhances the price competitiveness of their exports and artificially inflates their overseas profits when converted into yen.
But the fall in the yen has turned into a tumble since March, and this has severely increased the cost of Japanese imports at a time when energy and food prices are soaring in the wake of the war in Ukraine, which is weakening household purchasing power.
The Bank of Japan (BoJ) nevertheless confirmed on Friday the accommodative line of its monetary policy, its governor Haruhiko Kuroda warning that one should “not expect interest rate hikes (…) anytime soon”.
Despite national inflation moving beyond its target since April (2% excluding fresh produce) and having accelerated in September to 3% over one year, the BoJ believes that the conditions are not yet in place for monetary tightening in Japan.
The institution “intends to conduct its monetary policy so that price stability is achieved in a sustainable and stable manner, accompanied by wage increases”, insisted Mr. Kuroda.
(With AFP)
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