Tokyo 7 September : Japanese Finance Minister Shunichi Suzuki on Wednesday said the government would take “necessary steps” in the event that the trend of the weakening of the yen continues.Suzuki also stated to journalists that he is “concerned” about the yen’s swift “one-sided” moves as well as the negative side of the weakness of the yen need to be monitored, according to Xinhua news agency.
The remarks came shortly after the yen plunged to a new low of 24 years against the US dollar in the 143-144-yen range and echoed remarks he had made earlier in the day, when the Japanese currency also fell against the dollar.
The government in Japan indicated earlier on Wednesday that it was ready to take action in the markets for currency in the event that the yen continues its rapid decline due to “one-sided” movements in the currency, with Suzuki calling for stability in the currency markets and saying that the yen’s movement should be stable and reflect the economic fundamentals.
“Recent changes are quite swift and unbalanced.We should be monitoring developments with keen anticipation,” Suzuki told an earlier press conference.
Chief of the government’s top spokesman, Chief Cabinet Secretary Hirokazu Matsuno, meanwhile, also expressed “concern” about the yen’s decline.
He informed the media that Japan is prepared to take action if current trends continue, but without giving any further explanation.
The dollar traded in the upper part of the 143-143 yen zone in the early hours of Wednesday, levels that have not been experienced since 1998 traders here pointed out.
The Federal Reserve’s abrasive rate hikes to fight inflation, and the possibility that they will continue for the rest of the year, and possibly be increased further, have resulted in the yen becoming a currency substitute against the dollar.
In contrast the Bank of Japan (BOJ) has remained steadfast in its monetary policy that is extremely loose, setting its benchmark interest rates at less than 0.1 percent, while maintaining its 10-year Japanese government bond yields to be around zero percent.
The BOJ’s policy stance of dovishness has resulted in the interest rate gap between Japan and the US increase which has led to US purchasing of dollars and the yen’s weakening and is causing some volatility in the Japanese stock market.
A weak yen, on other hand, is a blessing for Japan’s export-driven economy because export profits who export to overseas markets are boosted when repatriated and price competition is improved in international markets when the yen’s value is lower than the major currencies.
However a prolonged weak yen will further increase prices for already high raw materials and energy which are essential for poor resource-poor Japan to constantly import, which in the end will further damage Japan’s already deteriorating trade balance and economy overall.
