en swings sharply as traders watch for possible government intervention

Japan’s currency moved sharply on Friday morning before settling back down, prompting questions about whether officials might step in to support the weakening yen.

The dollar climbed past the 159.00 mark against the yen after Bank of Japan Governor Ueda gave few clues about plans to help the currency. He talked mainly about working with government officials to keep the bond market stable. But the dollar’s rise didn’t last long. Selling pressure pushed the pair down to 157.33 before it moved back near 158.00, ending the day down 0.3%.

Officials stay quiet on intervention speculation

Finance Minister Satsuki Katayama told reporters on Friday she was keeping a close eye on currency trading. However, she wouldn’t say anything about the talk in the markets that officials had been calling banks to check on exchange rates. Such calls often precede the government’s decision to buy or sell currency.

Katayama spoke at the Finance Ministry after the yen’s sudden jump prompted traders to wonder whether officials were preparing to prop up the currency, which has been losing value lately.

Atsushi Mimura, who handles international money matters as vice finance minister, also stayed quiet about the yen’s sharp move. When reporters asked if Tokyo had bought yen to push up its value, he said, “In this situation, I have no intention of commenting on that.” He gave the same answer when asked about the rate check rumors.

The officials’ silence stands out because Katayama usually speaks up to try to talk down the dollar-yen rate. Their quiet approach suggests they might be ready to act rather than just talk. When the government actually steps in to buy or sell currency, the price moves are usually much bigger and last longer. This particular move doesn’t look like a full intervention yet. It seems more like the standard calls officials make to banks before they actually step in, as per the report by investing live.

Japan did something similar in July 2024 and back in September 2022. Both times, officials made these rate check calls with banks shortly before they moved to buy yen.

Central bank holds rates steady

On Friday, the Bank of Japan decided to keep interest rates where they are. The central bank also raised its predictions for economic growth and inflation, showing it plans to keep pushing rates higher from their current low levels. The bank kept short-term rates at 0.75% with eight members voting yes and one voting no.

Hirofumi Suzuki, who works as chief currency strategist at SMBC in Tokyo, said the decision to hold rates steady made sense. “As expected, the BOJ left monetary policy unchanged. With risk factors such as a slowdown in overseas economies gradually receding, and with the BOJ having just raised rates last month, it is now in a phase of taking time to assess the effects of the hike,” Suzuki explained.

He added that Governor Ueda would likely be careful in his comments about currency movements and signal that the bank is ready to work with the government on bond market issues if needed. Suzuki thinks the bank will keep raising rates slowly, maybe once every six months to a year.

Tohru Sasaki, chief strategist at Fukuoka Financial Group, pointed to the bank’s focus on inflation. “The focus on inflation looks a little bit hawkish. I think it shows that the BOJ intends to continue to hike the policy rate,” he said.

Sasaki noted that core inflation is expected to stay above 2% based on the bank’s forecasts. He thinks that if the dollar-yen rate reaches about 160, that would give the government and central bank a good reason to raise rates in April.

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