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Japan’s Suzuki says it will consider effectiveness of intervention

He Japanese Finance Minister Shunichi Suzukisaid on Friday that will take action against excessive currency volatility when necessary and consider the effectiveness of intervention.

Featured Statements

It is important to maintain market confidence in public finances.

The drop in Japan’s foreign reserves at the end of May partially reflects intervention in the foreign exchange market.

The use of intervention in the foreign exchange market must be limited.

Excessive currency volatility must be addressed where necessary.

We propose to limit the tax reduction to this year.

We will consider the effectiveness of the intervention.

There will be no limit of funds for intervention in the foreign exchange market.

The market determines the exchange rate, reflecting the fundamentals.

The Japanese Yen FAQs

The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by the performance of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of Japanese and US bonds or the risk sentiment among traders, among other factors.

One of the mandates of the Bank of Japan is currency control, so its movements are key for the Yen. The BoJ has intervened directly in currency markets on occasion, usually to lower the value of the Yen, although it often refrains from doing so due to the political concerns of its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the depreciation of the Yen against its main 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 decades-old levels of inflation.

The Bank of Japan’s ultra-loose monetary policy stance has led to increased policy divergence with other central banks, particularly the US Federal Reserve. This favors the widening of the spread between US and Japanese 10-year bonds, which favors the Dollar against the Yen.

The Japanese Yen is often considered a safe haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. In turbulent times, the Yen is likely to appreciate against other currencies that are considered riskier to invest in.

Source: Fx Street

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