Japan’s Suzuki: Rapid FX moves are undesirable
Japanese Finance Minister Shunichi Suzuki said on Wednesday that rapid foreign exchange (FX) movements are undesirable. However, Suzuki declined to comment on whether the US has agreed on Japan's FX intervention.
Key quotes
“Disorderly FX movements negatively impact the economy.”
“Cannot comment on whether the US has agreed on Japan's FX intervention.”
“FX influenced by more than just US-Japan rate difference.”
“BoJ should handle monetary policy.”
“BOJ's government bond purchases are a component of their monetary policy.”
“Will monitoring the effects of increasing interest rates on the economy.”
“Concerned about rising rates leading to fiscal rigidity.”
“Will appropriately run fiscal policy to maintain trust.”
“Will not comment on FX levels.”
“Important for currencies to move in a stable manner, reflecting fundamentals.”
Weak yen has positive and negative aspects.”
Market reaction
At the time of writing, USD/JPY is trading 0.32% higher on the day to trade at 155.20.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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