Japan Weighs Possible Yen Intervention

(MENAFN) Officials in Japan are considering stepping into the foreign exchange market to address the sharp decline of the yen against the US dollar. Any such move, however, would hinge on the stipulations outlined in the bilateral US–Japan currency accord.

The ongoing depreciation of the yen poses a significant obstacle for the Japanese economy.

The Bank of Japan (BoJ) recently lifted its benchmark interest rate by 25 basis points to 0.75%, matching expectations, in response to mounting inflationary pressures and the weakening currency. This adjustment marks the highest policy rate level in three decades.

Despite these increases, the yen has continued to lose ground. Governor Kazuo Ueda refrained from signaling the timing or pace of future hikes, stressing that decisions would be data-driven. Following his comments, the yen weakened further and bond yields climbed.

Market analysts highlighted that Japan’s annual inflation reached 2.9% in November, implying that the current rate of 0.75% may not be sufficiently tight to counter inflationary risks.

Finance Minister Satsuki Katayama remarked that intervention could be an option to limit extreme fluctuations in the yen. At a press briefing, she emphasized that the present conditions do not mirror the underlying fundamentals of the economy and assured that the government would act appropriately.

Even after the rate increase, the dollar-yen exchange rate eased only marginally, moving from 157 to 156.

Japan last stepped into the currency market in July 2024, when the exchange rate surged to 161.96 per dollar, its highest point since 1986.

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