As the yen approaches the ¥160-per-dollar level, the finance vice-minister heightened market vigilance by invoking a “reminder of summer.” The report describes a situation in which expectations of U.S. rate hikes and concerns over foreign-exchange intervention are colliding.
As the yen approached the ¥160-per-dollar level, Finance Vice Minister Mimura Atsushi (三村淳) told reporters that “the pace of the moves over the past few days feels particularly fast,” cautioning against a rapid decline in the yen. His remarks, which evoked the intervention carried out in summer, heightened market vigilance.
In the previous day's New York market, the yen fell temporarily to ¥159.94. U.S. October CPI exceeded market expectations, and comments from Federal Reserve officials strengthened expectations of additional rate hikes. Yen selling and dollar buying prevailed against the backdrop of a widening Japan-U.S. interest-rate differential.
The government and the Bank of Japan carried out a total of approximately ¥15.4 trillion in yen-buying and dollar-selling intervention this summer. Coordinated intervention was also conducted at the end of July, sending the yen temporarily from the ¥163 range to ¥155.23. The finance vice-minister's remarks are seen as intended to heighten vigilance over renewed intervention.
Many expect the dollar's strength and the yen's weakness to continue unless expectations of additional U.S. rate hikes recede. At the same time, the focus will be on whether the Tokyo authorities will limit themselves to verbal intervention or proceed with actual market intervention. The upward pressure on import prices also requires attention, and policy decisions will need to be made cautiously.