Japanese Finance Minister Declines to Comment on IMF Remarks on Currency Intervention
Finance Minister Shunichi Suzuki refuses to address IMF official’s comments on currency intervention
Japanese Finance Minister Shunichi Suzuki has chosen not to comment on recent remarks by an International Monetary Fund (IMF) official regarding currency intervention. Suzuki stated that there is no need to elaborate on the factors that determine exchange rates.
Yen’s recent decline driven by fundamentals, says IMF official
The recent decline in the yen is attributed to fundamental factors and does not meet the requirements for authorities to intervene in the currency market, according to Sanjaya Panth, Deputy Director of the IMF’s Asia and Pacific Department.
Finance Minister Suzuki dismisses IMF official’s comment
Suzuki responded to the IMF official’s comment by stating that various individuals make remarks, and it is unnecessary for him to comment on every single one. He emphasized that the comment was made by just one official of the IMF.
Factors influencing currency rates extend beyond long-term interest rates
Masato Kanda, Vice Finance Minister for International Affairs at Japan’s Ministry of Finance, noted that various factors determine currency rates and that long-term interest rates are only one of those factors.
IMF’s criteria for foreign exchange intervention
The IMF believes that foreign exchange intervention is justified only under certain conditions, such as severe dysfunction in the market, heightened financial stability risks, or a de-anchoring of inflation expectations. According to Panth, none of these conditions exist at present.
Japan’s previous yen intervention
In September and October of last year, Japan bought yen to boost the currency, marking its first intervention in the market since 1998. This action was taken to counter sharp declines that eventually led to the yen reaching a 32-year low against the dollar.
Focus on the speed of fluctuations, not a specific level
While the yen has approached the 150 per dollar threshold that some investors believe may trigger intervention, Japanese authorities maintain that it is the speed of fluctuations, rather than a specific level, that would prompt action.
Renewed pressure on Japanese authorities
Japanese authorities are facing renewed pressure to address the sustained depreciation of the yen. Investors are betting on higher U.S. interest rates while the Bank of Japan maintains its super-low interest rate policy.
