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Rare Statement Suggests Tokyo May Intervene to Support the Yen

Ministry of Finance, the BOJ and the Financial Services Agency express concern over yen weakness in strongest signal so far that Tokyo may step in to stem the slide

Ministry of Finance, the BOJ and the Financial Services Agency issue rare joint statement expressing concern over yen weakness.
Finance Minister Shunichi Suzuki. File photo: Reuters.

The Bank of Japan and Japanese government officials have issued an unusual joint statement expressing concerns about the sudden and rapid decline in the yen, the strongest signal so far that Tokyo may step in to stem the slide as the yen hits two-decade lows.

The statement underscores growing concern about the economic impact of a much lower yen given rising prices for commodities Japan must import.

After a meeting with his Bank of Japan (BOJ) counterpart, top currency diplomat Masato Kanda told reporters that Tokyo will “respond flexibly with all options on the table,” but would not indicate if Tokyo would negotiate with other countries to jointly intervene.

The G7, of which Japan is a member, has a long-standing policy that markets should set exchange rates, but that the group can coordinate currency moves to avoid excessive and disorderly exchange-rate moves.

“We have seen sharp yen declines and are concerned about recent currency market moves,” the Ministry of Finance, the BOJ and the Financial Services Agency said in the joint statement released after their executives’ met.

“We will communicate closely with each country’s currency authorities and respond appropriately as needed,” based on the G7 principles, the statement said.

Officials of the three institutions meet occasionally, usually to signal to markets their alarm over sharp market moves. But it is rare for them to issue a joint statement with explicit warnings over currency moves.

The statement came just hours before the US released the Treasury Department’s twice-annual currency manipulation report, which included Japan among 12 countries whose foreign exchange practices merit “close attention.” It took note of the recent yen weakness, which it attributed largely to interest rate differentials owing to BOJ policy.

The yen briefly rallied to 133.37 yen per dollar after the statement, but lost most of that after stronger-than-expected US inflation numbers came out, potentially signaling more aggressive US dollar rate increases, which would further widen the rate differentials.


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“Tokyo could intervene if the yen slides below 135 to the dollar and starts going into a free fall. That’s when Tokyo really needs to step in,” said Atsushi Takeda, chief economist at Itochu Economic Research Institute in Tokyo.

“But Washington won’t join, so it will be solo intervention. For the United States, there’s really no merit in joining Tokyo on intervention.”

The yen’s sharp declines have inflated already rising raw material import costs, jacking up households’ living costs and putting pressure on the BOJ to address creeping inflation.

Unlike other major central banks which are flagging aggressive interest rate hikes to tackle inflation, the BOJ has repeatedly committed to keeping rates low, making Japanese assets less attractive for investors.

That increasing policy divergence has pushed the yen down 15% against the dollar since early March, within striking distance of 135.20 hit on Jan. 31, 2002. A break past that would be its lowest since October 1998.

Underscoring growing public sensitivity to rising living costs, BOJ Governor Haruhiko Kuroda was forced to apologize on Tuesday for a remark a day earlier that households were becoming more accepting of price rises.

“What can potentially slow the pace of depreciation is a change in policy but right now it looks like there is no indication that the Bank of Japan is concerned about inflation or the impact of the weak yen on that,” said Moh Siong Sim, a currency strategist at Bank of Singapore.

“It (the joint statement) is more of a verbal intervention and I’m not sure whether it will amount to any action and won’t have any impact on the yen,” he said, adding the bar for actual intervention in foreign exchange markets remains very high.

  • Reuters, with editing by Neal McGrath



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Neal McGrath

Neal McGrath is a New York-based financial journalist. Neal started his career covering the Asia-Pacific region for the Economist Intelligence Unit, then joined Asian Business magazine. He's subsequently held a variety of editorial positions covering business, economics, finance and sustainability. Neal has lived and worked in Hong Kong, Singapore, Germany and the US.


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