Home ForexArticles Japan repeats verbal warning to yen bears, BOJ maintains dovish tone By Reuters

Japan repeats verbal warning to yen bears, BOJ maintains dovish tone By Reuters

by SuperiorInvest

By Leika Kihara and Kentaro Sugiyama

TOKYO (Reuters) – Japanese Prime Minister Fumio Kishida said on Thursday the government will not rule out any options to address excessive moves in the currency market, underscoring Tokyo's determination to intervene in the market if it deems the fall in the currency exaggerated. and in.

“It is important that exchange rates move stably and reflect economic fundamentals,” Kishida said at a news conference, when asked about the yen's recent drop to three-decade lows.

“We will monitor currency movements with a high sense of urgency and respond appropriately without ruling out any options to deal with excessive currency movements,” he said.

His comments echoed those of Japan's top currency diplomat, Masato Kanda, on Wednesday, when the yen hit a 34-year low against the dollar on expectations that the Bank of Japan will be slow to raise interest rates. , thus maintaining the huge gap between Japanese and US rates. .

On Wednesday, the dollar briefly reached 151.975 yen, surpassing the 151.94 level at which Japanese authorities intervened during October 2022 to buy the currency.

It lost some ground on Thursday to settle at 151.370 yen.

The yen's sharp falls come despite the BOJ's decision last week to end eight years of negative interest rates, as traders focused more on its dovish message, suggesting another rate hike will be some time away.

By ending negative rates, many BOJ officials saw the need to go slowly in phasing out ultra-loose monetary policy, a summary of views at last week's meeting showed on Thursday.

“With the yen weakening to a new 34-year low against the dollar, the Finance Ministry signaled that intervention in currency markets is imminent,” said Marcel Thieliant, head of Asia-Pacific at Capital Economics.

“However, the yen certainly won't receive much support from Japan's monetary policymakers, as inflation is more likely to fall short of the Bank of Japan's forecasts rather than exceed them.”

Data to be released on Friday is likely to show that annual core inflation in Japan's capital, which is seen as a leading indicator of national trends, slowed to 2.4% in March after a 2.4% rise. .5% in February, according to a Reuters survey.

Japanese authorities have historically favored a weak yen as it helps boost profits for the country's large manufacturers.

But sharp declines in the yen recently have added to Tokyo's headaches by inflating the cost of raw material imports, hurting consumption and retail profits.

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