Japan indicates speculative movements on yen, hints at possible intervention

Japanese Finance Minister Shunichi Suzuki said on Friday that speculative movements were behind the yen’s declines in the recent period and hinted that the authorities are still ready to intervene in the market to confront any sharp declines in the currency.

According to Reuters, Suzuki said that the authorities are monitoring the speed of the yen’s movements, not its levels. He reiterated Tokyo’s warnings in the previous period that it does not rule out taking any steps to deal with irregular currency movements.

“The continued decline of the yen despite the narrowing of the interest rate gap, albeit modestly, indicates that there are speculative movements in the market,” Suzuki told Parliament.

He added, “It is important for currency prices to move stably… Sharp fluctuations are undesirable, and we monitor market movements from this standpoint.”

With interest rates at the Bank of Japan remaining near zero, analysts say that expectations that the gap between US and Japanese interest rates will remain wide give traders a justification to continue selling the yen.

The yen has been on a downward trend since the Bank of Japan’s decision last week to abandon eight years of negative interest rates and roll back its radical stimulus program.

The Japanese currency reached its lowest level in 34 years against the dollar, recording 151.975 to the dollar this week, after the markets interpreted the Bank of Japan’s directives on monetary easing as an indication that raising interest rates will occur slowly in the future. The yen recovered some of its losses, reaching 151.35 against the dollar on Friday.

Japanese policymakers usually prefer a lower yen because it helps boost the profits of the country’s major manufacturing companies, but the sharp decline recorded by the Japanese currency has increased Tokyo’s troubles recently due to increased costs of importing raw materials, which has damaged consumption and retail sales profits.