Masato Kanda, an official in the Japanese government, said on Tuesday that Japan may need to take action against any unorganized movements in foreign exchange due to speculation, bolstering Tokyo’s readiness to intervene again to support the fragile yen. In a sign of authorities’ concerns about the recent decline in the yen, Bank of Japan Governor Kazuo Oda said that currency movements were among the topics discussed at a meeting with Prime Minister Fumio Kishida on Tuesday.
Kanda, Japan’s Deputy Minister of Finance for International Affairs, who also oversees the country’s currency policy, said that the government does not need to intervene if exchange rates move steadily reflecting fundamentals. However, when there are excessive fluctuations or unorganized movements due to speculation, the market does not function, and the government may need to take appropriate action. We will continue to follow the same firm approach we have taken in the past.
Oda also stated that the central bank will steer monetary policy while closely monitoring how the yen’s depreciation affects inflation, indicating that currency movements may impact the pace and timing of future interest rate hikes.
He also told reporters after meeting with Prime Minister Kishida, “I mentioned that, in general, currency movements can have a significant potential impact on the economy and prices, so the Bank of Japan will closely scrutinize the recent yen declines.” While a weak yen is a boon for Japanese exporters, it has become a headache for monetary policymakers as it increases import costs, adds to inflationary pressures, and squeezes consumers.
