As threat of intervention grows, Japan deals ‘strictly’ with currency speculators

  • Finmin says it does not tolerate excessive and speculative weakening of the yen
  • The yen drops past 150 to the dollar, its lowest level in 32 years
  • Market players prepare for a second round of intervention
  • BOJ Kuroda repeats easy political mantra and warns of risks

TOKYO, Oct 21 (Reuters) – Japanese Finance Minister Shunichi Suzuki said on Friday authorities were dealing “strictly” with currency speculators as a prolonged sell-off in the yen kept markets on high alert. for a new dollar-selling intervention by Tokyo.

Speculation that Japan will follow through on its September decision and re-enter the market has increased over the past week as its currency slid further to 32-year lows above 150 yen.

“We are strictly dealing with speculators,” Suzuki said at a regular press conference, when asked if the Japanese yen was under attack from speculators. “We cannot tolerate excessive movements by speculators. We will respond appropriately while monitoring forex market movements with a high sense of urgency.”

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Suzuki’s comments came after the yen weakened past the key psychological level of 150 to the dollar on Thursday for the first time since August 1990. The yen was trading around 150.30-40 to the dollar when post-trade in Asia on Friday.

Investors are looking for clues as to whether authorities are already carrying out a so-called stealth intervention, but believe such action would have limited impact.

“I won’t rule out further intervention. If they do intervene, they could do it on a larger scale. But it won’t be effective, because they’re running against the tide of a strong dollar,” said Masafumi Yamamoto, head of FX. strategist at Mizuho Securities.

The dollar has jumped about 30% against the yen this year, although Japan has spent up to a record 2.8 trillion yen ($19.7 billion) – the equivalent of half its annual defense spending – intervening in the foreign exchange market in September to support its currency for the first time. time since 1998. read more

BOJ TO STAY DOVISH

Analysts expect the yen’s bearish trend to continue unless the Bank of Japan backs down from its ultra-loose monetary policy, which its governor Haruhiko Kuroda has repeatedly ruled out.

“Uncertainty over Japan’s economic outlook is extremely high,” Kuroda said in a speech Friday, underscoring the bank’s determination to keep rates low.

“We need to closely monitor the impact that financial and currency market movements could have on Japan’s economy and prices,” he said.

Asked about monetary policy, Finance Minister Suzuki said only that it was up to the BOJ to decide.

The government, for its part, is set to compile a package of economic measures by the end of this month to ease the pain of soaring energy and food costs, which would add pressure Japan’s already disastrous public finances.

Suzuki has stressed the importance of maintaining confidence in Japan’s finances, after Britain was plunged into financial crisis following a market backlash over plans for huge unfunded tax cuts , forcing its Prime Minister Liz Truss to resign after just six weeks in office.

Any increase in debt issuance to finance the package could disrupt Japan’s already jittery government bond market.

The BOJ conducted emergency bond buying operations for the second straight day on Friday as the yield on 20-year government bonds hit a new high in a fresh challenge to the central bank’s resolve to defend its ultra-easy policy.

Data released on Friday showed Japan’s core consumer inflation rate accelerated to a new eight-year high of 3.0%, beating the BOJ’s target for a sixth straight month. , a sign of widening price pressures.

The BOJ is likely to revise its price forecast up slightly in new quarterly projections due at its October 27-28 policy meeting, but will maintain ultra-low rates and dovish policy guidance, sources told Reuters. close to the file.

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Reporting by Tetsushi Kajimoto and Leika Kihara; Additional reporting by Kantaro Komiya and Sakura Murakami Editing by Chang-Ran Kim & Shri Navaratnam

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