Shunichi Suzuki, the finance minister of Japan, stated on Friday that markets should determine currencies even though abrupt changes are undesirable. He also gave no indication that the government will intervene in the market to support the weak yen, which is increasing import costs.
“Currencies should reflect underlying economic principles… I’m keeping a careful eye on currency movements’, Suzuki told reporters, adhering to the official stance.
“Since I previously mentioned it, my opinion on currencies hasn’t changed. Nothing else has to be said, Suzuki said.
The lack of effort to prevent the yen from dropping below 145 yen to the dollar startled several market participants. Last September, Japan’s first yen-buying intervention in 24 years was brought on by a violation of that level.
“I was surprised by the lack of enthusiasm in Suzuki’s comment,” said Daisaku Ueno, chief FX strategist at Mitsubishi UFJ Securities. It led me to believe that the Japanese government won’t act until the dollar reaches a 32-year low around 152 yen.
Currency markets continue to speculate that the Japanese government may switch strategies in response to the weak yen by concentrating on fiscal policy initiatives, such as maintaining a petrol subsidy to lessen the impact of price increases on consumers.
Authorities claim that by luring more international visitors, the cheaper yen is boosting the services industry.
Another possibility was that Japan would not be able to convince the United States to support a dollar-selling intervention.
The yen has been struggling recently as investors increased their wagers that the Bank of Japan will continue to pursue its ultra-loose monetary policy while the U.S. Federal Reserve hikes interest rates or keeps them higher for longer in an effort to contain inflation.
Traders are keeping an eye out for any indications that Japanese authorities will step in to support the troubled currency.
Since last month, however, Japanese authorities have hardly increased their warnings against speculators aiming to devalue the yen.
Prime Minister Fumio Kishida has been rushing to find ways to subsidise petrol retail prices and to reduce increases in utility bills as a result of the weak yen’s impact on import costs for food and fuel, which has reduced household purchasing power.
Even as it gradually moves away from yield curve control, the BOJ continues to stand out among other major central banks due to its loose monetary policy.