The USD/JPY rallied to its highest levels since September 11, after Japan's Finance Minister Taro Aso said it was important to keep foreign exchange intervention as a policy option.
Speaking in parliament on Thursday, Aso said, "Japan must have tools to counter speculative moves in the currency market."
Aso's remarks emphasized the Japanese government's commitment to stimulate the economy with a weaker yen. Concerns over the health of the Japanese economy heightened after annualized GDP growth slowed in the third quarter.
While the yen softened after Aso’s remarks, Japanese shares rallied, with the Nikkei 225 (NKY) Stock Average closing at its highest level since May. Depreciation of the yen aids Japanese exporters, making their products cheaper in foreign markets.
Japan's Prime Minister Shinzo Abe entered office in 2012 with a plan to control the strength of the yen, his broader strategy for economic growth often referred to in the press as "Abenomics." In April, the Bank of Japan announced their large scale bond-buying program geared to stimulate the Japanese economy and prevent deflation.
The program succeeded in weakening the yen initially, causing a substantial softening of the Japanese currency.
However, the yen stabilized somewhat as concerns over military intervention in Syria and the US debt crisis caused investors to move to the currency as a safe haven.
Meanwhile, in the United States yesterday's comments from Janet Yellen, U.S. President Barack Obama's nominee to lead the Federal Reserve, suggested that a taper of the Fed's $85 billion a month bond-buying program may not come in December.
In her confirmation hearing before the Senate Banking Committee, Yellen said, "We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession."
Addressing the dual mandate of the Fed, to pursue maximum employment and stable prices, Yellen said, "unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential. At the same time, inflation has been running below the Federal Reserve's goal of 2 percent and is expected to continue to do so for some time."
Looking at the USD/JPY daily chart we can see that price has broken out above trend line resistance and is again trading above the key psychological level of 100.
USD/JPY Daily Chart" title="USD/JPY Daily Chart" width="700" height="581">
BY Dan Blystone