Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

Japan repeats verbal warning to yen bears, BOJ keeps dovish tone

Published 03/27/2024, 10:38 PM
Updated 03/28/2024, 08:45 AM
© Reuters. A worker holds a sample of a new Japanese yen banknote at a factory of the National Printing Bureau producing Bank of Japan notes at a media event about the new notes scheduled to be introduced in 2024, in Tokyo, Japan, November 21, 2022. REUTERS/Kim Kyun
USD/JPY
-

By Leika Kihara and Kentaro Sugiyama

TOKYO (Reuters) -Japanese Prime Minister Fumio Kishida said on Thursday the government will not rule out any options in addressing excessive moves in the currency market, stressing Tokyo's resolve to step into the market if it sees the yen's fall as overdone.

"It's important for currency rates to move stably reflecting economic fundamentals," Kishida told a news conference, when asked about the yen's recent slide to three-decade lows.

"We will monitor currency moves with a high sense of urgency, and respond appropriately without ruling out any options to deal with excessive currency moves," he said.

His remarks echoed those by Japan's top currency diplomat Masato Kanda on Wednesday, when the yen hit a 34-year low against the dollar on expectations the Bank of Japan will go slow in raising interest rates, thereby maintaining the huge gap between Japanese and U.S. rates.

On Wednesday the dollar briefly hit 151.975 yen, exceeding the 151.94 level at which Japanese authorities stepped in during October 2022 to buy the currency.

On Thursday it lost some ground to stand at 151.370 yen.

The yen's sharp declines come despite the BOJ's decision last week to end eight years of negative interest rates, as traders focused more on its dovish message suggesting that another rate hike will be some time off.

Upon ending negative rates, many BOJ policymakers saw the need to go slow in phasing out ultra-loose monetary policy, a summary of opinions at last week's meeting showed on Thursday.

"With the yen weakening to a fresh 34-year low against the dollar, the Ministry of Finance signalled that an intervention in the foreign exchange markets is imminent," said Marcel Thieliant, head of Asia-Pacific at Capital Economics.

"However, the yen will certainly not get much support from Japan's monetary policymakers as inflation is more likely to undershoot than to overshoot the Bank of Japan's forecasts."

Data due out on Friday is likely to show annual core inflation in Japan's capital, which is considered a leading indicator of nationwide trends, slowed to 2.4% in March after a 2.5% gain in February, according to a Reuters poll.

© Reuters. A worker holds a sample of a new Japanese yen banknote at a factory of the National Printing Bureau producing Bank of Japan notes at a media event about the new notes scheduled to be introduced in 2024, in Tokyo, Japan, November 21, 2022. REUTERS/Kim Kyung-Hoon/File Photo

Japanese policymakers have historically favoured a weak yen as it helps boost profits at the country's big manufacturers.

But the yen's sharp declines have recently added to headaches for Tokyo by inflating the cost of raw material imports, hurting consumption and retail profits.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.