The Japanese yen weakened against the US dollar on Tuesday as investors continue to doubt the Tokyo authorities will intervene in the foreign exchange market to prop up the currency. Despite officials warning that they could intervene in the market, traders have shrugged off the reports.
Masato Kanda, the Japanese government’s top currency diplomat, reportedly reinforced authorities’ preparedness to intervene and support a fragile yen. However, he noted that the government would not have to get involved in FX markets if exchange rates mirrored fundamentals.
“However, when there are excessive fluctuations or disorderly movements due to speculation, the market is not functioning and the government may have to take appropriate action. We will continue to take the same firm approach as we have in the past,” said Kanda.
Bank of Japan chief Kazuo Ueda reportedly told reporters that he discussed a meeting with Prime Minister Fumio Kishida.
“I mentioned that, in general, currency moves could have a potentially major impact on the economy and prices and that the BOJ will, therefore, scrutinize the yen’s recent falls in guiding policy,” Ueda told reporters after meeting Premier Kishida.
As FX Daily Report noted, Japan is believed to have spent tens of billions of dollars in the past week to prop up the struggling yen.
The yen recently collapsed to 160.00, its lowest level against the greenback since April 1990. Year-to-date, the yen is down 9.5% against the US dollar. Over the last 12 months, the yen has plunged more than 14% against the buck.
Marito Ueda, head of the market research department at SBI Liquidity Market, explained to Bloomberg News that it might be harder for Japan to intervene compared to the last time it did in 2022.
“Back then there was speculation that US interest rate hikes are ending, and the monetary policy outlook wasn’t unclear like now,” he said.
The USD/JPY currency pair rose 0.35% to 154.45, from an opening of 153.92, at 15:29 GMT on Tuesday. The EUR/JPY advanced 0.43% to 166.46, from an opening of 165.75.