Japan has indicated that it may intervene to support the yen, which has fallen to a 38-year low against the US dollar.
On Thursday, Japanese Finance Minister Shunichi Suzuki stated that authorities would take necessary action to protect the economy. The dollar-Yen exchange rate widened to 160 on Thursday which prompted authorities to announce support for their currency.
“Rapid, one-sided moves are undesirable. In particular, we’re deeply concerned about the effect on the economy,” Suzuki told reporters. “We are watching moves with a high sense of urgency, analyzing the factors behind the moves, and will take necessary actions.”
The finance chief’s comments followed the yen’s weakening to 160.88 against the dollar late on Wednesday, its lowest level since 1986.
This recent decline is attributed to signals from the US Federal Reserve about maintaining elevated interest rates and concerns over political uncertainty in Europe ahead of the French parliamentary elections.
Japan last intervened to support its currency in April when it hit a 34-year low, spending a record 9.788 trillion yen ($62.2 billion). Authorities also intervened in the foreign exchange market three times in 2022.
Since early 2021, the yen has lost more than one-third of its value as investors sell off the currency due to the widening gap between US and Japanese interest rates. While the US Federal Reserve has raised interest rates to combat inflation, Japan’s central bank has kept borrowing costs near record lows to stimulate economic growth after decades of stagnation.
The yen’s depreciation has benefited Japanese exporters but has significantly increased the cost of imports, especially food and fuel, straining household budgets.
Japanese stocks fell on Thursday as traders awaited signs of intervention, with the benchmark Nikkei 225 index closing down 0.8 percent.
