Japanese Yen Shaky as Japanese Authorities Warn About Volatility in the Currency

Following a drop to a 32-year low for the Japanese yen (JPY) last week and meetings of the heads of the world’s financial systems that acknowledged currency instability, Japanese authorities continued to provide verbal warnings to the market on Monday of a stern response to notably rapid yen losses.

After the Group of Seven (G7) countries said last week that members will closely monitor emerging volatility, Japan’s top currency diplomat Masato Kanda told reporters that “each country would respond appropriately” on currencies. However, the statement did not indicate any collaborative intervention.

The Nikkei Business Daily cited Finance Minister Shunichi Suzuki as saying on Monday that authorities would take decisive action against excessive currency moves fueled by speculation. Mr. Suzuki had previously stated following meetings last week that Japan would not always reveal when it takes action in the currency market.

Suzuki responded to a question from the press later earlier on Monday about whether Japan had engaged in any covert market interventions since its entry on September 22: “I won’t comment on that.”

Although the government’s warnings regarding currency changes have typically not had consistent or enduring effects on the markets, the phrase “decisive steps” is occasionally used as a prelude to intervention.

Suzuki was cited as adding, “We’re always following currency movements with a sense of urgency.”

Japanese Yen Weakness to Prompt Another Intervention by Authorities

Late last week, the Japanese yen plunged to a 32-year low near 149.00, sparking concern about the likelihood of a covert intervention after the impact of the first such attempt since 1998 to support the yen last month rapidly dissipated.

The yen was trading around 148.80 against the dollar (USD) on Monday, still circling the 149.00 mark.

Authorities in Japan are worried that the yen’s unexpected and rapid losses, sparked by interest rate increases worldwide while Japan maintains an ultra-easy monetary policy, will increase already high import costs that are already straining both individuals and businesses.

The sudden movements of the yen make it more difficult for businesses to make judgments. Japanese authorities have stated that they won’t try to maintain a specific level of the yen but rather would concentrate on reducing volatility.