Japan conducts yen-buying intervention for 1st time since 1998

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TOKYO – Japan on Thursday stepped into the currency market amid the yen’s abrupt fall, a senior Finance Ministry official said, in its first such intervention since 1998.

“We took a decisive step” as speculative moves have been seen in the currency market, Masato Kanda, Japan’s top currency diplomat, told reporters, adding, “We will continue to watch foreign exchange moves with a high sense of urgency.”

Earlier in the day, Kanda said Japan could intervene in the foreign exchange market “anytime” to prevent the yen from plunging further, hours after the currency hit a new 24-year low against the U.S. dollar.

Japan is believed to have sold dollar-denominated assets it holds, such as U.S. Treasuries, to buy the yen, investors said.

A financial data screen in Tokyo shows the U.S. dollar plunging against the yen after Japan conducted yen-buying intervention for 1st time since 1998 on Sept. 22, 2022. (Kyodo)

On Thursday, the Bank of Japan maintained its ultralow rate policy as widely expected to prop up the pandemic-hit economy, sticking to a dovish stance despite the yen’s sharp decline in a global policy-tightening wave to tackle inflation.

The U.S. Federal Reserve on Wednesday raised its benchmark policy rate by 0.75 percentage point to combat surging inflation, consolidating the view among market participants that the interest rate gap between the United States and Japan will widen further.

The dollar rose above the 145 yen line in Tokyo trading Thursday, its highest level since 1998, before Kanda made the comments.

The yen-buying, dollar-selling operation was conducted after Japanese authorities said all options were on the table in their response to the yen’s rapid depreciation.

Immediately before Kanda announced later Thursday that Japan intervened in the currency market, the dollar plunged versus the yen. Some traders, however, said the effects of the intervention may be limited, given the BOJ’s drastic monetary easing.

BOJ Governor Haruhiko Kuroda said at a press conference after its two-day policy meeting that the central bank will not lift interest rates for the next two or three years.

A falling yen usually shores up exports by making Japanese products cheaper abroad and increases the value of overseas revenues in yen terms, but it drives up import prices. Japan depends on imports for more than 90 percent of its energy needs.

Japan’s core consumer prices soared 2.8 percent to a nearly eight-year high in August, government data showed Tuesday, in the latest sign of cost-push inflation without wage growth.

The Japanese government last conducted yen-selling, not yen-buying, intervention in October and November 2011, after the currency hit a postwar high of 75.32 to the dollar. In March that year, a devastating earthquake struck northeastern Japan.

After Shinzo Abe became Japan’s prime minister in December 2012, the yen was on a downward trend against a backdrop of his economic policy, dubbed “Abenomics,” including aggressive monetary easing, massive fiscal spending and growth strategy.


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