On Friday, Japan’s Government stepped up to have a discourse on a long-laying issue. Hot on their heels, the central bank announced that with concerns by relatively recent stringent falls in the currency in a seldom occurring joint statement. It is believed to be the heaviest warning in decades that Tokyo may need to cast its hands in support of the yen. It has descended to lows lasting 2 decades against the US dollar and a 7-year prolonged rough patch against the euro on the supposition that the Bank of Japan (BOJ) would only lag and chase tails of rivalling central banks in exiting stimulus policy.
Also on Friday, Shunichi Suzuki, the Japanese Finance Minister had refrained from stating any leads on the probability of Government intervention in the overseas exchange market to sniff out the weakness in their foundation, while simultaneously cautioning against any robust fluctuations the markets can begin.
Japan has many roads to take when it comes to stemming the extensive yen falls, apart from the verbal authority. One such solution is for them to appear in the currency market to stage an intervention by buying up massive amounts of yen.
Masato Kanda, a currency diplomat, met his counterparty in front of the authority which is the BOJ to discuss their options. He’d attended an on-spot press conference and revealed that Tokyo will respond flexibly and in a matter of consideration with all of its options laid on the table. However, he refused to comment on Tokyo’s potential involvement to negotiate with the other countries and their markets.
The situation has gotten so severe that the Ministry of Finance, the Financial Services Agency, and the BOJ added their own two cents to address the issue. The joint statement revealed after the meeting of the executives claimed that they’d seen dangerously sharp yen declines and had become concerned about recent market moves for the currency. Japan is a member of the G7 group, which has a policy lasting through decades that while markets can determine currency rates, the group is still to be the one who will remain hawk-eyed as they monitor monetary moves. They believe firmly that extensive and disorganized exchange rates or prices could hurt the overall growth.
What makes the joint statement meeting rather bizarre is that while the officials of the three organizations tend to meet on occasions, typically to shepherd markets over risky management and loss moves, it is seldom known that they’d gather to issue a joint statement with precise and cutthroat caution over the unstable monetary moves. Soon after, the US dollar plummeted 0.70% to 133.41 yen. The chief market strategist at Sumitomo Mitsui DS Asset management had concluded that the fall was probably only a slight, hinted jaw-boning since the pace of the currency’s downfall had been near accelerating promptly in the past 7 days. Though, he did also state that it’s unlikely Tokyo would conduct yen-sale intervention since that has to be consented by the US. Inflation has had its reign over major central banks who have taken to riling up the interest rate hitches with belligerence and sheer determination. Unlike them, BOJ has been loyal in keeping its rates the usual standard. This has resulted in a sour outcome of the Japanese assets being unappealing for investors and therefore, the yen has been sent hurtling down to within the right distance from its freefall of 135.20 hit on January 31st, 2002. Any more intervals after that would be its nethermost since the October of 1998. Japan has set its eyes on the prevention of such a breakdown.