On Thursday, the yen plummeted to its lowest level since in August 1990, far exceeding the level when it triggered Japan's first foreign exchange intervention in 24 years last month. Japanese officials continue to warn of speculation behind the fall in the yen, trying to alleviate the depreciation of the yen.
is attending Washington
Although Shunichi Suzuki reiterated his point that Japan's intervention last month had been understood by the United States, the Treasury Secretary said he did not hold bilateral talks with U.S. Treasury Secretary Yellen . Yukio Ishizuki, senior foreign exchange strategist at Daiwa Securities, believes:
"Suzuki Shunichi said he reiterated that the international foreign exchange agreement is important, which may be intended to imply that Japan has been approved to intervene in the case of excessive exchange rate fluctuations. Whether this is imminent is another question, because the keyword is excessive fluctuation, and players in the market seem to be careful to avoid offending the authorities."
Bank of Japan Governor Kuroda Haruhiko made it clear that he had no intention of changing the ultra-low interest rate policy that caused the yen to decline and reiterated his commitment to support the economy, because inflation driven by costs is currently unsustainable, and price growth is expected to be lower than the target level again next year.
Hideo Kumano, a former official of the Bank of Japan and currently chief economist of the Dai-ichiLife Research Institute, believes that the Bank of Japan's policies will not change until Haruhiko Kuroda leaves office as president in April next year. He said:
"They don't say whether the intervention has been made, which will surround the market doubts, which may curb the yen's decline. From now on, this will be a psychological war, irrelevant to the scale of intervention."
Signals from the options market indicate that traders are taking the threat of Japan's intervention seriously. The one-month risk reversal indicator for the dollar-JPY (an indicator that measures the expected trend of the dollar-JPY in the short term) remains below zero, while the longer-term risk reversal indicator indicates that investors are still betting that the yen will weaken.
Ishizuki says there is no clear definition of what causes excessive fluctuations and what is the catalyst for action. While officials say they are watching the yen’s decline rate to decide whether to intervene, the ultimate factor may be a key level. If the dollar is close to 150 against the yen, there will be a lot of voices in Japan, which may prompt the authorities to take action.
