Foreign Currency

Japan finance chief sees need for stable forex moves amid weak yen

Japanese Finance Minister Shunichi Suzuki on Friday stressed the need for foreign exchange rates to move stably by reflecting economic fundamentals, saying that excessive fluctuations should be rectified.

Speaking at a press conference during his visit to Georgia, Suzuki declined to comment on whether Japan intervened in the currency market when the yen spiked in a short span of time Wednesday in New York.

Japanese authorities have threatened to take action against excessive volatility in the currency market, with the yen falling sharply against the U.S. dollar.

Japanese Finance Minister Shunichi Suzuki (C) and Bank of Japan Deputy Governor Ryozo Himino (R) give a press conference in Tbilisi on May 3, 2024. (Kyodo)

“Foreign exchange rates should be determined by market forces, reflecting fundamentals. It’s desirable that they move stably,” Suzuki told a press conference in the Georgian capital of Tbilisi on the fringes of meetings related to the Asian Development Bank.

Suzuki added that rapid changes cause negative impacts for households and businesses in making plans. “It may become necessary to smooth out excessive moves,” he said.

Despite market talk of currency interventions by Japanese authorities, Japanese government officials have remained silent, leaving traders in the dark.

“Stealth interventions” are used to make traders jittery and prevent them from making bold moves.

Based on data from the Bank of Japan and market sources, Japan likely spent around 8 trillion yen ($52 billion) this week to step into the market and slow the yen’s decline.

Japanese Finance Minister Shunichi Suzuki (5th from L) and Bank of Japan Deputy Governor Ryozo Himino (4th from L) are among the officials attending a meeting of finance ministers and central bank governors from Japan, China, South Korea and the members of the Association of Southeast Asian Nations in Tbilisi on May 3, 2024. (Kyodo)

The yen, which earlier this week tumbled past 160 to the dollar, has regained some of its strength. It rose to the 151 zone on Friday.

Still, the underlying trend of a weak yen remains intact, reflecting the wide interest rate differential between Japan and the United States.

The BOJ raised interest rates for the first time in 17 years in March, but rapid hikes are not considered likely. The U.S. Federal Reserve, for its part, is now expected to take a longer time before starting to cut interest rates.

Related coverage:

Yen briefly rises to 151 in N.Y. after weak U.S. labor data

Another suspected market intervention likely cost Japan 3 trillion yen

BOJ’s March minutes show no urgency to raise rates further

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