Updated March 26th, 2024 at 13:05 IST

Japan remains vigilant amid faltering Yen, open to all measures to stabilise Currency

The Yen's depreciation accelerated after the BoJ's decision to end eight years of negative interest rates, signaling a shift towards tighter monetary policy.

Reported by: Business Desk
Yen | Image:Pixabay
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Japanese Yen falls: Japan is closely monitoring the weakening Yen and is prepared to take all necessary steps to address its decline, according to Finance Minister Shunichi Suzuki. The statement comes as the nation grapples with concerns over excessive volatility in the currency market following last week's historic shift away from years of accommodative monetary policy.

Suzuki's remarks echo sentiments expressed by Japan's top currency diplomat, highlighting Tokyo's growing unease over the Yen's recent slide. While acknowledging the mixed impact of a weak Yen on the economy, Suzuki emphasised the need for stability in currency movements, particularly to mitigate uncertainties for businesses.

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"Rapid currency moves are undesirable," Suzuki stated after a cabinet meeting. "It is important for currencies to move stably, reflecting economic fundamentals."

The Yen's depreciation accelerated after the Bank of Japan's decision to end eight years of negative interest rates, signaling a shift towards tighter monetary policy. Despite market expectations of only marginal rate hikes in the near term, Yen bears have been emboldened, driving the currency lower against the Dollar.

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The Dollar hovered near 151.26 Yen in Tuesday afternoon trading, facing significant resistance around the 152 level amid speculation of potential intervention by Japanese authorities. The Yen has depreciated by approximately 7 per cent against the Dollar since the beginning of the year.

Makoto Noji, chief market strategist at SMBC Nikko Securities, warned of possible intervention if the Dollar breaches the 152-Yen threshold. However, Suzuki refrained from commenting on specific intervention plans, emphasising the importance of monitoring currency fluctuations closely.

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Japan's last intervention in the currency market occurred in 2022 when the Dollar approached 145 Yen and later surged to a 32-year high near 152 levels. While authorities remain wary of excessive currency depreciation, they also recognise the role of retail investors and investment flows in driving market dynamics.

"The government must be careful not to disturb such investment flows too much," Noji remarked. "That said, authorities may have no choice but to arrest the Dollar's ascent towards 160 Yen."

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(With Reuters inputs.)

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Published March 26th, 2024 at 13:05 IST