Japan’s tepid warning on yen fuels renewed weakness ahead of IMF meetings

Japan’s finance minister warned he was ready to take action in the foreign exchange market if needed, but stopped short of his maximum threat, comments that fuelled renewed yen weakness after the currency slumped to a fresh 34-year low overnight.

“We are closely monitoring the latest developments,” Finance Minister Shunichi Suzuki said on Tuesday (Apr 16) in Tokyo before his departure to Washington for annual International Monetary Fund events and meetings of finance chiefs of the Group of Seven and Group of Twenty nations. “We are prepared to take all possible measures to respond to the situation if it is necessary.”

Suzuki didn’t roll out the threat of taking “bold” action if needed, the most direct hint of possible intervention in foreign exchange markets, a phrase he used last month when the currency approached the 152 mark against the dollar.  

The finance minister’s comments come after the yen set a fresh 34-year low of 154.45 following stronger than expected US retail sales figures. With Suzuki refraining from his maximum threat the yen weakened to its low for the day. 

Japanese currency officials are in a tight spot as they head to the US for meetings with their peers. International agreements call on nations to allow markets to determine exchange rates, though they leave the door open for action if there are excessive movements in the market. Strong verbal interventions or a move into the market would put Japan’s actions in the spotlight.

Suzuki said he would refrain from commenting on whether moves in the market have been rapid or excessive.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

“Regarding movements in the foreign exchange market, my position is the same as what I’ve said so far, and I would like to refrain from repeating that,” he said.

Japan spent more than US$60 billion in 2022 to intervene in the currency market to prop up the yen.

The latest US data feed into a picture of economic resilience in the US that again pushes back against expectations the Federal Reserve will cut interest rates in the coming months. 

The difference in US and Japanese interest rates and yields is a key factor behind the weakness in the yen, one that makes it harder for Japanese officials to argue that the currency is out of line with economic fundamentals. BLOOMBERG