The yen continued to fall below 150 yen to the US dollar today, increasing pressure on Japanese authorities to intervene.
On October 26, the yen briefly fell to 150.5 yen per US dollar, its lowest level in a year, approaching last year's 151.9 mark, which prompted Japanese authorities to intervene in the currency market for the first time in 24 years.
While a weaker yen is good for exporters, it has recently become a headache for Japanese officials. Inflation raises the cost of imported raw materials and affects the cost of living for Japanese people.
Japanese authorities issued a warning to speculators on the yen on Tuesday after it breached the 150 mark, a level at which investors had expected authorities to intervene. The Japanese currency has breached the 150 yen-to-dollar mark several times this month.
USD/Yen exchange rate developments over the past year. Chart: Reuters
"It is important that the exchange rate reflects the fundamentals. Excessive fluctuations are undesirable," Deputy Chief Cabinet Secretary Hideki Murai said at a regular press conference today, but 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 markets "with a sense of urgency." He also did not mention intervention.
The yen has been depreciating since the beginning of the year due to the interest rate differential between the US and Japan. While the US has been raising interest rates to curb inflation, Japan has maintained negative interest rates. The latest developments could put more 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, which excludes volatile food and fuel prices, was 2.8 percent in September. This is the 18th consecutive month that inflation has exceeded the BOJ's 2 percent target.
Governor Kazuo Ueda has insisted that ultra-loose monetary policy must be maintained until prices rise at a sustainable rate and are driven by rising demand. But with wage increases failing to offset inflation, the government has recently drawn up plans for a $33 billion package of measures to support households, including cash handouts and income tax cuts.
Ha Thu (according to Reuters)
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