The Japanese yen is struggling at 3-decade lows while the country’s finance minister says its mix of currency intervention and loose monetary policy isn’t contradictory

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A money changer counts Japanese Yen notes in Singapore.
A money changer counts Japanese Yen notes in Singapore.

  • Defending the yen through intervention while the BoJ maintains loose monetary policy is “not contradictory,” Japan’s finance minister said.
  • Japan likely spent a record 5.5 trillion yen in its latest market intervention. 
  • The yen recently hit a fresh 32-year low against the US dollar. 

Japan’s finance ministry has been defending the country’s weak yen in the currency markets while the Bank of Japan has been maintaining an ultra-loose monetary policy – and there’s no contradiction in the mix of actions, Japan’s finance minister said Tuesday.

“Monetary easing aimed at sustainable and stable price hikes including wage growth, and currency intervention in response to excessive market moves, are different in terms of policy objectives, and thus they are not contradictory,” Japanese Finance Minister Shunichi Suzuki said at a news conference, according to Reuters

Suzuki was asked whether monetary easing may cause excessive weakness in the yen and if the policy mix between the government and the central bank was having the intended effects.

The Japanese yen has plunged against the US dollar in what’s been a strong year for the greenback against major rivals. The dollar has soared about 29% against the yen, and the yen recently reached a fresh 32-year low as the dollar bought more than ¥151. The dollar on Tuesday was down 0.6% at ¥148.07.

Yen weakness has persisted even as the Japanese government has intervened in the foreign exchange market to prop up the currency’s value. Japan likely spent a record 5.4 trillion to 5.5 trillion yen ($36.37 billion to $37 billion) last Friday in its latest yen-buying intervention, Reuters reported, citing estimates by money market brokerage firms in Tokyo. 

The dollar has soared against most currencies this year largely as the Federal Reserve’s aggressive interest rate hikes to fight hot inflation make the yield on US Treasuries attractive to foreign investors, fueling dollar demand. 

The Bank of Japan on Friday, in its aim to support the Japanese economy, is expected to keep its benchmark rate at 0.1% and reiterate its commitment to bond buying that limits Japan’s 10-year yield at around 0.25%. 

Policymakers have voiced concerns about the impact of a weak yen on living costs, said the report. 

The US 10-year Treasury yield was at 4.13% on Tuesday.

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