The Bank of Japan comes to the rescue of the yen with the first intervention in the market since 1998

If the river makes a noise its because water is running. For weeks it had been heard that the Bank of Japan operators were testing the foreign exchange market to come to the rescue of the yen, albeit temporarily. The rumors have come true. The Bank of Japan has had to intervene in the foreign exchange market (buying yen and selling international currencies) to strengthen the yen for the first time since the late 1990s on Thursday, after the Japanese currency fell to a 24-year low. . The Bank of Japan has become a rare bird within world central banking. While the ECB, the Fed or the Bank of England are ‘fighting’ to raise rates fast and curb inflation, the Bank of Japan has promised to maintain its ultra-loose negative rate policy for years.

The intervention, which according to traders took place shortly after 5:00 p.m. local time in Tokyo (10:00 a.m. in Madrid), caused the yen to rise from 145.83 to 142.39 yen per dollar in the space of a few minutes. Analyzing the cross from the other side, each yen went from being worth 0.0063 dollars to exceeding the area of ​​0.0071 dollars.

Yen regains some lost ground

“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.

Analysts, however, doubt whether the move will stem the yen’s protracted slide for long. The currency has depreciated almost 20% this year, falling to 24-year lows, largely due to aggressive interest rate hikes in the United States pushing the dollar higher. As you can see from the chart, after the intervention that has boosted the yen, the Japanese currency has slowly started to lose momentum.

The market suspected

“The market was expecting some intervention at some point, given the increasing verbal interventions we’ve been hearing in recent weeks,” Stuart Cole, chief macroeconomist at Equiti Capital in London, told Reuters.

The yen, which has ceased to function as a safe haven, fell even more strongly after Haruhiko Kuroda, the governor of the Bank of Japan, announced on Wednesday that the monetary institute will not change its monetary policy despite the fact that inflation has exceeded the 2% and that the yen seems to be in free fall.

“We are not going to change our prospective guidance for now and ‘for now’ does not mean a couple of months, but two or three years,” Kuroda forcefully explained in his appearance at the end of the central bank’s monthly monetary policy meeting on Thursday. Japan, which decided to keep its ultra-low rate strategy unchanged.

The BoJ’s policy, which includes negative reference interest rates (-0.1%), contrasts with the tightening that the rest of the most influential central banks, such as the United States or the European, are betting on, and this divergence is leading the yen to depreciate to levels of 24 years ago against the dollar.

Nevertheless, the governor of the japanese central bank was concerned by the recent “unilateral” and “speculative” movements of the Japanese currency, but pointed out that “monetary policy does not have the objective of controlling the currency, but rather inflation”.


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J. A. Allen

Author, blogger, freelance writer. Hater of spiders. Drinker of wine. Mother of hellions.

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