Japan intervened this Thursday in the foreign exchange market for the first time since 1998 to prop up the battered yen, following the central bank’s decision to keep interest rates ultra-low, which has sent the currency tumbling.
“We have taken decisive action (in the foreign exchange market),” Deputy Finance Minister for International Affairs Masato Kanda told reporters, answering in the affirmative when asked if that meant intervention.
The dollar extended its decline against the yen and lost more than 2% to 141.15 yen after the confirmation of the intervention. Earlier, the dollar had risen more than 1% against the Japanese currency, which had hit its lowest level in 24 years.
“The market was expecting some intervention at some point, given the increasing verbal interventions we’ve been hearing in recent weeks,” said Stuart Cole, chief macroeconomist at Equiti Capital in London.
But currency interventions are rarely successful and I think today’s move will only provide a temporary respite (for the yen),” he said.
The measure came hours after the decision of the Bank of Japan to keep interest rates extraordinarily low to support economic growth, against a global wave of monetary tightening from central banks struggling to rein in rising inflation.
“There is no change in our stance to keep monetary policy loose at the moment. We will not raise rates interest rates for some time,” Bank of Japan Governor Haruhiko Kuroda said at a briefing after the decision.
The Bank of Japan’s decision came after the Federal Reserve The US government will make its third straight interest rate hike of 75 basis points on Wednesday and signal more hikes, underscoring its resolve not to budge in its fight against inflation.
The yen has depreciated almost 20% this year, as the Bank of Japan has maintained an extraordinarily easy monetary policy, while many of its global counterparts, such as the Federal Reserve, have aggressively raised rates to cool rising prices. prices.
The Bank of Japan kept interest rates ultra-low as expected in a two-day meeting that ended Thursday, leaving unchanged its promise to keep them at “current levels or below.”
Yen buying intervention has been very infrequent. The last time Japan stepped in to support its currency was in 1998, when the Asian financial crisis triggered a yen selloff and a rapid capital outflow from the region.
Earlier, Tokyo intervened to counter the yen’s slump in 1991-1992.
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