Japan's top currency diplomat, Masato Kanda, who will instruct the BoJ to intervene, when he judges it necessary, said that he has no comment on foreign exchange (FX) intervention for now when was asked by media if authorities had stepped into markets to support the Yen. Kanda added that the Ministry of Finance will release figures on currency intervention at the end of May.
Key quotes
“No comment on intervention.”
"Will disclose at end of next month.”
“Currency impact has a bigger impact on import prices now.”
“Excessive FX moves could impact on daily lives.”
“Need to take appropriate actions on FX.”
“Inappropriate to comment on Bank of Japan Governor Ueda’s comment.”
“Ready to take action 24 hours a day.”
“Won't comment on FX levels.”
Market reaction
The Japanese Yen (JPY) has attracted some buyers from the likely intervention by the Japanese authorities during Monday’s Asian session. At the time of writing, USD/JPY was trading at 156.27, losing 0.06% on the day.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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