Japan’s Top Currency Diplomat Warns Against Weakening Yen

Masato Kanda, Japan’s leading currency diplomat, has raised concerns over the weakening yen, asserting that Japan will contemplate all possible measures to address excessive currency fluctuations. Kanda stressed the importance of stable currency movements that mirror economic fundamentals, as the yen recently depreciated beyond ¥143 against the US dollar, hitting a seven-month low, and dropped to a 15-year low past ¥155 against the euro.

The depreciation of the Japanese currency, often regarded as a safe-haven asset, has sparked apprehensions about potential surges in import costs that may negatively affect consumers. Kanda mentioned that authorities are ready to intervene in the market if required, although he did not elaborate on specific actions at this time.
The contrasting monetary policies between the Bank of Japan (BOJ) and the US Federal Reserve have been recognized as a key factor behind the strengthening US dollar. While Japan persists with its easing measures, the US central bank has adopted a more assertive approach to tightening policy to fight inflation.

In October, Japan last intervened to halt the currency’s weakening when it reached a 32-year low near ¥152 against the US dollar. Kanda affirmed that all options remain open when questioned about the possibility of future currency intervention.

Kanda emphasized that extreme and one-sided exchange rate movements, irrespective of their direction, can generally harm the economy. He conveyed a sense of urgency in closely monitoring the swift and one-sided nature of recent currency shifts, assuring that appropriate responses would be implemented.

Moreover, Kanda explained that authorities are concentrating on the speed of the yen’s movements rather than its specific levels. Investors have been offloading the yen after the BOJ decided to maintain ultra-low interest rates and persist with its extensive stimulus, unlike other central banks tightening their monetary policies to counter rising inflation.

In summary, Japan’s top currency diplomat has issued a stern warning against the weakening yen, underlining the potential risks to the nation’s economy and the significance of stable currency movements reflecting economic fundamentals. The Japanese government is vigilantly monitoring the situation and is prepared to intervene in the market, if necessary, with all options under consideration. The disparity in monetary policy between the BOJ and the US Federal Reserve, along with other central banks’ tightening measures, adds intricacy to the situation and demands close scrutiny from authorities to preserve currency stability and safeguard Japan’s economic interests.