The yen continued to fall below 150 yen per US dollar today, increasing pressure on Japanese authorities to intervene.
During the trading session on October 26th, the yen briefly fell to 150.5 yen per US dollar. This was the lowest level in a year, approaching last year's 151.9 yen mark – the point that prompted Japanese authorities to intervene in the currency market for the first time in 24 years.
Although a weak yen benefits export companies, this development has recently become a headache for Japanese officials. Inflation is driving up the cost of importing raw materials and affecting people's living expenses.
Japanese authorities today issued a warning to those speculating on the yen after its value surpassed the 150 mark, a threshold at which investors anticipate intervention by authorities. This month, the Japanese currency has crossed the 150 yen to one US dollar mark several times.
The USD/Yen exchange rate movement over the past year. Chart: Reuters
"It is important that the exchange rate accurately reflects the fundamental factors. Excessive volatility is undesirable," said Hideki Murai, Japan's Deputy Chief Cabinet Secretary, at a regular press briefing today. However, he declined to comment on whether Japan would intervene in the currency market.
Japanese Finance Minister Shunichi Suzuki also told reporters that they would closely monitor the markets "with urgency." He did not mention intervening.
The yen has depreciated since the beginning of this year due to the interest rate differential between the US and Japan. While the US has continuously raised interest rates to curb inflation, Japan has maintained negative interest rates. This latest development could put further pressure on the Bank of Japan (BOJ) to change its monetary policy. The BOJ will hold a policy meeting next week.
Japan's core inflation (excluding the often volatile prices of food and fuel) was 2.8% in September. This marks the 18th consecutive month that inflation has exceeded the Bank of Japan's 2% target.
Nevertheless, Governor Kazuo Ueda has consistently emphasized the need to maintain ultra-loose monetary policy until prices rise sustainably and demand increases. But with wage increases failing to offset inflation, the Japanese government recently planned a $33 billion support package for households, including cash handouts and income tax reductions.
Ha Thu (according to Reuters)
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