(Bloomberg) — The yen has slumped to a level that leaves it on track for its worst year on record, prompting the strongest warnings to date from senior Japanese government officials aimed at stemming the slide.
(Bloomberg) — The yen has slumped to a level that leaves it on track for its worst year on record, prompting the strongest warnings to date from senior Japanese government officials aimed at stemming the slide.
The currency fell as much 0.6% to 143.71 per dollar Wednesday in a third day of declines. Chief Cabinet Secretary Hirokazu Matsuno told reporters he’s concerned about recent rapid, one-sided moves and Japan would need to take necessary action if they continued.
“The government will continue to watch forex market moves with a high sense of urgency and take necessary responses if this sort of move continues,” the country’s top spokesman said.
Finance Minister Shunichi Suzuki said he is watching the yen’s weakness with great interest, Kyodo News reported separately.
The currency has slumped more than 19% this year, and edged past its previous worst annual drawdown in 1979. The renewed selloff in Treasuries this month has widened the yield gap between the US and Japan, driving up the dollar and pushing the yen to a 24-year low.
The Japanese currency wasn’t the only one in the firing line Wednesday with the greenback stronger against all Group-of-10 peers as well as Asian counterparts from the yuan to the won. The Bloomberg Dollar Spot Index extended a record high for the gauge.
Pressure On
Dollar-yen surged past the 143 level for the first time since 1998 Tuesday, a move which will ramp up pressure on Bank of Japan Governor Haruhiko Kuroda’s defiance of a global shift toward rate hikes and the strength of Prime Minister Fumio Kishida’s support for his stance.
“The MOF and the BOJ probably believe the current phase is clearly the dollar’s strength, and not the yen’s issue,” said Mari Iwashita, chief market economist at Daiwa Securities Co. “That means there unfortunately is no sense of urgency about intervention or the need for the BOJ to tweak policy.”
In June, Japanese officials said they would take action if necessary, without specifying what that would be, after a three-party meeting held between the Ministry of Finance, the central bank and the Financial Services Agency.
A Trader’s Guide to Japanese Policy Makers’ Language on the Yen
Japan last intervened to prop up the currency in 1998, at around the same time much of Asia was being buffeted by a regional financial crisis.
Bond Purchases
In the bond market Wednesday, the BOJ said it would boost scheduled debt purchases as the intensifying Treasuries selloff also put upward pressure on yields. The move came as Japan’s benchmark 10-year yield approached the 0.25% upper limit of the BOJ’s tolerated trading band.
BOJ Boosts Bond Buying as Yields Advance Toward Policy Limit
In the options market, bets on further yen weakness are growing. One-year risk-reversals for dollar-yen — a gauge of expected direction for the currency pair over that time frame — have hit the highest since 2015, according to data compiled by Bloomberg.
(Updates with dollar context and BOJ bond purchases.)
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