© Stocksak. In this Kyodo photo, Shunichi Suzuki, Japan’s Finance Minister, speaks to media at the Finance Ministry in Tokyo, Japan, October 20, 2022. Kyodo/via REUTERS
By Leika Kirhara, Saqib Ahmed and Gertrude Chavez–Dreyfuss
TOKYO/LONDON/NEW YORK (Stocksak) – Japanese authorities likely intervened in markets to stem the slide of the country’s battered currency on Friday, market participants said, following an unexpected jump in the yen against the dollar.
On Friday, the yen rose to 144.50 dollars per dollar, more than 7 yen higher than its 32-year low of 151.94 yen per USD. It was also up 7. The dollar was last seen at 147.34yen, down 1.8%.
Mazen Issa (senior FX strategist at TD Securities in New York) stated that “it’s very clearly a ministry of finance stepping into to sell dollar-yen.”
Karl Schamotta from Corpay in Toronto, was also a co-author. He stated that large blocks are being traded. “This typically means that either larger institutions move money or that a central banks is intervening in size. The most obvious evidence is the scale of dollar selling.
According to the, a source also stated that Japan had intervened in order to buy yens and sell dollars.
The Ministry of Finance of Japan declined to comment.
If confirmed, it would be the second time since September Japan has intervened on the currency market to support the yen.
The currency has fallen by around 22% against the dollar in the past year. This is because the Bank of Japan maintains an extremely loose monetary policy while the U.S. Federal Reserve, and other central banks, aggressively raise interest rates.
Falling yens are pushing up import costs, household living expenses, and putting pressure on Prime Minister Fumio Kishhida to stop this relentless fall.
GRAPHIC: Yen breaches 150 to the dollar https://graphics.reuters.com/JAPAN-YEN/jnpwyggzrpw/chart.png
Haruhikokuroda, Bank of Japan Governor has been consistent in stating that he will not change the policy stance. However, policymakers have voiced concerns.
Kuroda made a speech Friday stressing the central bank’s determination to keep rates low. Kuroda stated that there is “extremely high uncertainty over Japan’s economic outlook.” “We must be vigilant about the potential impact that currency and financial market movements could have on Japan’s economy and prices.”
Shunichi Suzuki, Japan’s Finance Minister, said Friday that the authorities were dealing “strictly” with currency speculators.
“We cannot accept excessive moves by speculators. Suzuki said that they will respond appropriately while keeping an eye on currency market movements with a high level of urgency.
TD’s Issa said the market intervention happened at “a very illiquid time”, when traders in London were headed home for the weekend.
Issa stated that it seems designed to inflict the most pain possible on.
Japan has rarely intervened in currency market markets. Prior to the September intervention, Japan had never intervened in currency markets. This was during the Asian financial crises of 1997-98.
It spent a record 2.8 trillion Japanese yen ($19.7billion) in the intervention last month, which is equivalent to half of its annual defense spending.
As the yen fell below the psychological level of 150 dollars per dollar on Thursday, speculation that Japan would enter the market again grew over the past week. This was the first time since August 1990.
Authorities have denied that they have a line-in the sand in mind. However, political factors require them to be aware of psychologically important thresholds.
They also study technical charts that show key support levels for the Japanese yen, which, if broken could accelerate its fall.
Some market participants have pointed out the dollar/yen’s July 1990 high above the 152 mark as the next threshold. Then, it would be 155.
Axel Merk (president of Merk Investments) and portfolio manager of Merk Hard Currency Fund said that he believes there are few things that can stop the yen weakening.
“Ultimately these interventions don’t help that much if the underlying policy is fostering the weak yen,” he said.