The Japanese yen has crossed the 155 level against the dollar on Wednesday and is then at its lowest level against the dollar in 34 years (USDJPY). The yen has not been this weak against the dollar since June 1990. This marked weakening has again revived expectations of intervention by Japan’s finance ministry.
Finance Minister Shunichi Suzuki and other political leaders have expressed that they are closely monitoring the currency market and are prepared to act as they believe is necessary to support the Japanese yen.
Market attention is now on the Bank of Japan’s (BoJ) meeting this week, where discussions are expected to center around the weakening and its potential impact on inflation.
“Despite no change in interest rates in the US and Japan, the yen has weakened rapidly against the dollar,” said Mitsuhiro Furusawa, former vice finance minister for international affairs.
He added that if this trend continues, there will be an intervention, he stated, adding that “we are very close.”
Do not believe in another interest rate increase yet
According to the Nikkei, a further interest rate increase is considered unlikely on Friday, while the BoJ is closely monitoring inflation developments. The central bank places particular emphasis on core inflation and carefully assesses the timing of any future interest rate adjustments.
“The risk of an intervention by the BoJ is high, it is also present regardless of the level,” said Win Thin, global head of market strategy at Brown Brothers Harriman.
In 2022, Japan intervened three times in the foreign exchange market to support the yen, when one dollar cost 151.95 yen. In total, 9 trillion yen, or about $58 billion, was spent on these interventions.
