Japanese Authorities Ready to Intervene in Foreign Exchange Market if Yen Falls Excessively
Tetsushi Kajimoto and Yoshifumi Takemoto
Japanese authorities are prepared to step in and stabilize the foreign exchange market if the yen experiences significant declines, according to a former top currency official in Japan. Takehiko Nakao, who held the position of vice finance minister for international affairs from 2011 to 2013, emphasized the potential for intervention as the yen neared a 34-year low against the dollar.
Concerns Over Yen’s Weakness
Nakao highlighted the substantial weakening of the yen against the dollar, referencing indicators such as the IMF’s real effective currency rates and the Big Mac index. While a weaker yen may benefit real estate and stock prices, it can adversely impact household incomes and consumption.
Intervention History and Future Possibilities
Expressing disapproval of the yen’s 30% decline against the dollar since 2022, Nakao mentioned Japan’s last intervention in October 2022 when the yen approached the upper range of 151-152 yen. He also warned against speculators attempting to influence the yen’s value and hinted at potential future interventions to address excessive currency movements.
Flexibility in Response
Nakao stressed the importance of garnering international support for efforts to strengthen the yen rather than weaken it for export competitiveness. With a keen eye on speculative activities affecting the yen, he suggested that authorities could intervene at any time to address concerning trends in the currency market.
