Japan intervenes in the FX market to stem yen decrease after BOJ keeps super-low rates

Japan intervenes in the FX market to stem yen decrease

September 23, 2022:-Japan intervened in the currency market on Thursday to shore up the battered yen for the initial since 1998, in the wake of the central bank’s decision to maintain ultra-low interest rates driving down the currency.

“We have taken decisive action,” vice finance minister for international affairs Masato Kanda told reporters, which responded in the affirmative when asked if that meant intervention.

After proof of the intervention, the dollar extended its decrease against the yen and was last down over 2% at 141.15 yen. It had earlier traded over 1% higher against the Japanese currency, plumbing fresh 24-year lows.

“The market was expecting a few interventions at some point, given the increasing verbal interventions we have been hearing more than the past few weeks,” said Stuart Cole, a head macroeconomist at Equiti Capital in London.

“But currency interventions are successful, and I anticipate today’s move will only provide a reprieve.”

The move came hours following the BOJ’s decision to maintain super-low interest rates to support the country’s weak economic recovery, bucking a global tide of monetary which tightens by central banks fighting to rein in increasing inflation.

“There’s zero change to our stance of maintaining easy monetary policy for the time being. We won’t be increasing interest rates for some time,” BOJ Governor Haruhiko Kuroda told a briefing after the policy decision.

The BOJ’s decision came following the U.S. Federal Reserve delivering its third straight rate of 75 basis points. It signaled more hikes ahead, underscoring its resolve not to let up in its battle against inflation and improve the dollar further.

The yen has depreciated almost 20% as the BOJ has kept policy super-loose while many of its global peers, leaving the Federal Reserve, have aggressively increased rates to cool surging prices.

On Thursday, in a widely expected move, the BOJ maintained ultra-low interest rates at a two-day meeting that ended and left a pledge to keep rates at “present or lower levels.”

The yen-buying intervention has been sporadic. The previous time Japan intervened to support its currency was in 1998, when the Asian financial crisis which is triggering a yen sell-off and a rapid capital outflow from the region.

Before that, Tokyo intervened to counter the yen decrease in 1991-1992.

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Japan intervenes in the FX market to stem yen decrease
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Japan intervenes in the FX market to stem yen decrease
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Japan intervened in the currency market on Thursday to shore up the battered yen for the initial since 1998,
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