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Japan: Watching currency movements urgently – Shunichi Suzuki

He Japanese Finance Minister Shunichi Suzuki, declared on Wednesday that it will closely monitor currency fluctuations as a matter of urgency. Suzuki further stated that he will take all necessary measures to avoid the weakness of the Japanese Yen (JPY).

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Watching the movement of the foreign exchange market with a sense of urgency“.

“I will not comment on currency levels.”

“It is not desirable for currencies to move quickly.”

It is important that currencies move stably and reflect fundamentals“.

“We will give a comprehensive answer on the foreign exchange market.”

Frequently asked questions about the Bank of Japan

What is the Bank of Japan?

The Bank of Japan (BoJ) is the Japanese central bank, which sets the country's monetary policy. Its mandate is to issue banknotes and carry out monetary and currency control to ensure price stability, which means an inflation target of around 2%.

What has been the policy of the Bank of Japan?

The Bank of Japan has embarked on ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low inflation environment. The bank's policy is based on Quantitative and Qualitative Easing (QQE), or printing of banknotes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further relaxed policy by first introducing negative interest rates and then directly controlling the yield on its 10-year government bonds.

How do the decisions of the Bank of Japan influence the Japanese Yen?

The Bank of Japan's massive stimulus has caused the Yen to depreciate against its major currency pairs. This process has been exacerbated more recently by a growing policy divergence between the Bank of Japan and other major central banks, which have opted to sharply raise interest rates to combat inflation levels that have been at record highs for decades. The Bank of Japan's policy of keeping rates low has caused the differential with other currencies to increase, dragging down the value of the Yen.

Will the Bank of Japan change its ultra-loose policy soon?

The weakness of the Yen and the rebound in global energy prices have caused a rise in Japanese inflation, which has exceeded the 2% target set by the Bank of Japan. Even so, the Bank of Japan judges that the sustainable and stable achievement of the 2% objective is still not in sight, so a sudden change in current monetary policy seems unlikely.

Source: Fx Street

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