Japan’s yen is weakening again, prompting talk of another intervention worth billions of dollars

A
fresh
bout
of
weakness
in
Japan’s
currency
has
lead
some
market
watchers
to
predict
more
sizeable
interventions
by
the
country’s
central
bank
as
it
persists
with
its
ultra-dovish
policy
in
a
world
of
high
rates
and
high
inflation.

The
Japanese
yen
has
been
sliding
toward
levels
that
last
prompted
government
officials
to
take
action
to
support
the
currency.
This
as
foreign
investors
enjoy
a
rally
in
Tokyo
stocks
thanks
to
the
cheaper
exchange
rate.

related
investing
news

an
hour
ago

The


Japanese
yen
traded
just
north
of
140
against
the


U.S.
dollar
on
Monday,
after
the
currency
breached
that
level
at
the
end
of
last
month
for
the
first
time
since
November.

Last
year,
Japan’s
Finance
Ministry

intervened
with
roughly
$68
billion
to
prop
up
the
yen
on
three
separate
days:
Sept.
22,
Oct.
21
and
Oct.
24
—
as
the
currency
notched

150
against
the
greenback,
weakening
to
levels
not
seen
since
1990.
Interventions
are

usually
unannounced
and
consist
of
the
central
bank
buying
large
amounts
of
yen
using
billions
in
dollar
reserves.

HSBC’s
head
of
Asian
foreign
exchange
research,
Joey
Chew,
said
the
yen’s
recent
movement
will
prompt
questions
about
whether
the
government
will
intervene
to
support
the
currency.

“Now
that
USD-JPY
has
broken
above
140
(on
the
back
of
higher
U.S.
yields),
we
think
there
will
soon
be
questions
about
potential
MoF
[Ministry
of
Finance]
intervention,”
she
wrote
in
a
Thursday
research
note.

However,
pointing
to
recent
language
used
by
Finance
Minister Shunichi Suzuki,
she
added
that
immediate
action
seems
less
likely.

“The
language
used
is
definitely
not
as
tough
compared
to
the
lead
up
to
the
September
2022
intervention,”
she
said.

Masato
Kanda,
Japan’s
vice
minister
of
finance
for
international
affairs,
told
reporters
last
week
that
the
government
would
step
in
if
needed
as
the
yen
showed
further
weakening,
according
to

Nikkei.
Kanda’s
comments
came
after
an
unscheduled
meeting
between
officials
at
Japan’s
Finance
Ministry,
the
publication
reported.

Chew
said,
“We
will
look
out
for
words
like
‘sense
of
urgency’,
‘excessive’,
‘one-sided’,
‘ready
to
act’,
coming
from
more
speakers
including
Kanda
or
even
Prime
Minister
[Fumio]
Kishida.”

This
time,
government
officials
could
intervene
when
the
yen
reaches
the
145
level
against
the
greenback,
Chew
said.

She
noted
the
month-on-month
change
seen
in
the
currency
before
the
intervention
in
September
had
a
range
of
6%
to
8%.
The
recent
movements
in
the
currency
shows
a
4%
to
5%
range,
she
added.
“To
get
to
above
6%
m-o-m,
USD-JPY
would
have
to
rise
to
145,”
she
said.

Meanwhile,
Goldman
Sachs
economists
noted
in
a
May
26
research
report
that
further
interest
rate
hikes
from
the
U.S.
Federal
Reserve
will
weaken
the
yen
further.

“We
think
that
if
markets
continue
to
price
a
better
U.S.
growth
outlook
and
more
hawkish
Fed
expectations
then
this is
consistent with
JPY
underperformance,
and
rate
differentials
explain
most
of
the
recent
JPY
weakening,”
they
said.

With
the
Bank
of
Japan
maintaining
its
ultra
dovish
stance
of
negative
interest
rates,
the
rate
differentials
between
the
U.S.
and
Japan’s
central
bank
will
persist,
they
said.

“We
still
see
risk
of
even
less
Yen
strength
if
the
Fed
continues
hiking
or
the
BoJ
keeps
policy
unchanged
for
longer
than
we
expect,
both
of
which
we
think
currently
look
like
a
closer
call
than
a
US
recession,”
they
said.

The
Bank
of
Japan’s
next
monetary
policy
meeting
is

scheduled
to
be
held
on
June
15
and
16.
Global
investors
usually
flock
to
a
country’s
currency
where
a
central
bank
is
raising
rates,
in
the
hope
of
a
higher
yield
on
their
investments,
thus
shunning
currencies
(like
the
yen)
where
rates
are
still
very
low.