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©Reuters. BoJ shows signs of intervention after renewed low of the yen in 24 years
Tokyo, Sep 14 (.).- The Japanese central bank today surveyed local investors in the foreign exchange market to find out the exchange rates they are using as a reference, in a move seen as a sign prior to a possible intervention after the yen fell to around 145 per dollar, its lowest in 24 years.
The Bank of Japan (BoJ) undertook a “rate check” shortly after the Finance Minister, Shunichi Suzuki, reiterated the concern that the Government has been showing in recent weeks about the volatility of the yen, and He said that no option is ruled out to try to control his accelerated fall.
“If these movements continue, I think we have to respond to them without ruling out any options,” Suzuki said at a press conference, who when asked expressly if they are thinking of intervening in the market to stop the rapid devaluation of the yen, replied : “It is correct to think that this is the case.”
Shortly after these statements, the Japanese central bank launched the consultation, which could be a preparatory measure for a potential intervention or a move to ward off speculation and curb the yen’s decline, which is increasing inflationary pressure on the Japanese economy.
THE 145 BARRIER
While a weak yen is often viewed positively as benefiting Japanese exporters by inflating their sales, the weakness of the Japanese currency is making the country’s vital imports more expensive in the current context of rising food, raw material and energy prices, when the economic impact of the pandemic is still very much in force in the archipelago.
The intensification of the warnings from the Japanese authorities and the consultation of rates from the Japanese central bank occur after the yen experienced great volatility this Wednesday, falling more than two units against the dollar to touch 144.96 units per greenback, touching the 145 yen barrier, a renewed minimum in 24 years.
The yen has fallen 30 units against the dollar since March, when the greenback was exchanged at 114 yen, a trend that represents its highest annual rate of decline since 1973 and is due to the end of the Reserve’s stimulus policy US Federal (Fed) that had been driven by the covid-19 pandemic.
The Japanese currency is also moving at its lowest level in seven years against the euro, after exceeding 144 units during the week after the European Central Bank (ECB) undertook an unprecedented rise in its reference interest rates.
MONETARY DIVERGENCE
This pressure to which the yen has been subjected since the second quarter of the year responds in part to the decoupling of the monetary policies of the Bank of Japan and its counterparts with greater weight on the international scene, such as the Fed and the ECB.
While the US central bank has undertaken four rate hikes this year to place them in the range of 2.25% and 2.5%, and the European credit institution has carried out its largest rate hike in history to place them at 1.25%, the BoJ is reluctant to abandon its ultra-low rates activated for a decade.
The Japanese central bank is keeping short-term rates at -0.1% and an extensive package of exchange-traded fund purchases to keep the long-term benchmark around 0%.
While its most influential counterparts have chosen to raise rates in the face of the post-pandemic era and in an attempt to curb runaway inflation, the BoJ is reluctant to update its policy, alleging that the current price rise is due to the geopolitical situation and rising prices. of energy and raw materials.
Japan is no stranger to inflationary pressure. Prices rose 2.4% in July, a level not seen since December 2014 and again above the BoJ’s 2% target, which considers, however, that the rise is temporary and mainly conditioned by the increase in the price of raw materials and energy, and has shown commitment to its ultra-flexible monetary strategy.
Investors’ eyes are now on next week’s Fed and BoJ monetary policy committee meetings to see how this divergence in stances evolves.
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