LONDON/TOKYO: Japan intervened in the foreign exchange market on Thursday for the first time since 1998, supporting the plunging yen. This sent the currency plummeting following the central bank’s decision to keep interest rates ultra-low.
“We have taken decisive action (in the foreign exchange market),” Vice Finance Minister Masato Kanda told reporters.
After the announcement, the yen jumped 2.2% against the US dollar to about 140.31 yen. The Bank of Japan’s commitment to ultra-low interest rates has weighed on the Japanese currency, which has lost 22% of its value this year.
Earlier Thursday, the currency hit a 24-year low of 145.90 against the dollar. The dollar he rose 0.8% on the day at 142.90 and the euro he rose 0.5% at 140.99.
Joe Lin, Investment Director, GOLDEN EQUATOR WEALTH, Singapore
“This kind of intervention cannot overcome the monetary policy disagreements between the US and Japan … It is when interest rates rise that it can really move the needle.”
“Now you react reflexively and the circle goes up a little bit, but after a while it just goes back to level 145.
“In the short term, there are few scenarios in which this trend will reverse, only if we can somehow control it or keep it within a range of dynamics.”
Naka Matsuzawa, Chief Japan Macro Strategist, Nomura, Tokyo:
“There are two things from here: how the U.S. counterpart reacts, and what[Prime Minister Fumio Kishida]says about it.
“With the Bank of Japan unwilling to change its easing bias and wanting a stronger dollar to keep inflation under control, I think it will be difficult for Japan to get a welcome message from the US about intervention.
“If we stay away from Abenomics, the weaker yen will not change policy (and the effect may be short-lived).
“In short, I think this intervention was probably done by Japan alone, without US backing, and probably without backing from the Bank of Japan. You can market.”
Toru Suehiro, Chief Economist, Daiwa Securities, Tokyo
“With Tokyo markets closing tomorrow (a public holiday) and the Bank of Japan’s decision to maintain today’s policy, the risk of further yen depreciation in thin markets has increased. We intervened at the last minute tonight after reaching the urging line and before the market became volatile.”
“For the time being, 1 dollar = 145 to 146 yen will be the ceiling. However, the next FOMC is just a month away and the US Federal Reserve Board (Fed) is not lagging behind the interest rate hike. Fed. “If the Fed’s interest rate hikes are expected to accelerate, the risk of further yen depreciation naturally remains.”
“We need to see how the U.S. Treasury Department responds. If they comment and show some understanding of the rapid yen depreciation and the actions of the Japanese government, the risk of further yen depreciation will be reduced. Otherwise, Japan will never be able to take another step forward.”
BEN LAIDLER, Global Market Strategist, Etro, London:
“Japan’s first currency intervention in almost a quarter century is an important but ultimately doomed step to protect the yen. However, this is due to the underlying cause of Japan’s bottoming out of interest rates and slowing economic growth. Intervention will only delay the depreciation of the yen, and will not stop it.”
Derek Halpenny, Head of Global Market Research, MUFG, London:
“Unless there is a clear change behind the yen’s depreciation, its ability to change trends is limited,” he said.
“The Treasury may see this as a time-buyer and expect the Fed to complete its tightening cycle by the end of the year, which could help bring about some reversal in trends. .”
Jane Foley, Head of Currency Strategy, Rabobank, London
“If this move was intended to slow the dollar/yen rally, it could have implications. Will it succeed in turning the dollar/yen around? I don’t think so.
“Given that the Bank of Japan endorsed a very loose monetary policy and that came shortly after the Fed endorsed a hawkish outlook, the fundamentals will boost USD/JPY.
“But what Japan is doing is sending a signal that pushing USD/JPY higher is not a free ride.”
Takeshi Minami Chief Economist Norinchukin Research Institute
“As interest rate hikes by the Fed and the Swiss National Bank widened interest rate differentials between Japan and other countries, Japan took a more real step than verbal warnings. was clearly trying to change his point of view.”
Simon Harvey, Head of FX Analysis, Monex, London
“For traders, the Japanese officials’ lip service this year has always been seen as a short-term hurdle, as they have repeatedly demonstrated a lack of willingness to follow up with real FX intervention. Currently, the Bank of Japan is battling yen short.
This policy will succeed in depreciating the dollar-yen in the short term, but given the Fed’s aggressive hawkish stance and the restrictive nature of Japan’s exchange rate, policymakers’ Ability becomes more skeptical. To reserve.
We continue to believe that in order to achieve a stronger yen over the medium term, the BOJ will need to abandon its ultra-accommodative policy stance as its efforts to intervene in the currency will prove unsustainable. ”
KAMAL SHARMA, Senior FX Strategist, Bank of America, London
“The next logical step would have been to actually intervene. Now this seems to be unilateral rather than multilateral. The Bank of Japan and the Ministry of Finance are just intervening.In the end, the question is: How much is it?”
“For the time being, it injected some two-way risk into the dollar-yen.”