Japan on alert for renewed intervention as yen weakens

Japan’s Chief Cabinet Secretary Yoshimasa Hayashi stated that authorities are closely watching exchange rates and are prepared to take necessary actions to address excessive volatility.

Hayashi did not confirm or deny Japan’s suspected intervention last week when the yen briefly strengthened after a US inflation report. Traders speculate that Tokyo may have spent around ¥3.57 trillion ($22.51 billion) to support the yen on Thursday.

The yen initially jumped to ¥157.40 per dollar following the suspected intervention but has since weakened to ¥158.62. This remains close to the ¥160 level, which some analysts believe Japan considers a line in the sand for further intervention.

This suggests authorities were worried more about the level of the yen, at below 160 (to the dollar), rather the speed of its falls, said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

A weak yen benefits exporter but raises concerns about inflation as import costs for fuel and food increase. Japanese authorities have a history of intervening in the currency market without public confirmation.

Attribution: Reuters