Japan’s top currency official said that recent yen weakness is odd and out of line with current economic fundamentals, reaffirming his commitment to act if needed to prevent excessive swings in the exchange rate.
“I strongly feel the recent sharp depreciation of the yen is unusual, given fundamentals such as the inflation trend and outlook, as well as the direction of monetary policy and yields in Japan and the US,” Japanese Vice Minister for International Affairs Masato Kanda said in an interview yesterday. “Many people think the yen is now moving in the opposite direction of where it should be going.”
Kanda’s remarks come amid intense market scrutiny over whether the government would step into the currency market to stem recent falls in the yen, following the Bank of Japan’s decision last week to raise interest rates for the first time since 2007. The currency slid to a 34-year low of ￥151.97 per US dollar on Wednesday, prompting Japanese Minister of Finance Shunichi Suzuki to increase verbal warnings, strongly hinting that Japan could intervene.
Photo: Bloomberg
Finance authorities also convened a three-way meeting, a gathering often used to show heightened concern among policymakers over market movements.
“We are currently monitoring developments in the foreign exchange market with a high sense of urgency,” Kanda said. “We will take appropriate measures against excessive foreign exchange moves without ruling out any options.”
Kanda reiterated the view that Japan is not guarding specific exchange rate levels, but is looking at the direction and speed of movements when assessing developments in the currency market, echoing Suzuki’s comments.
Japan had no defense line on exchange rates, Suzuki said when asked whether the ￥152 mark against the US dollar was a line in the sand.
Tokyo’s biggest intervention splurge was in 2022, after the yen approached 152, though the slide in that direction was much more rapid than currently seen.
Market participants try to gauge the proximity to possible market intervention from the language used by authorities.
“I am just saying what I think is right at the time,” Kanda said, referring to his choice of words.
Behind the yen’s weakness is the view among market players that the difference in policy rate and yields between Japan and its peers, including the US, would remain wide for some time.
Bank of Japan Governor Kazuo Ueda pledged to maintain an accommodative environment when the bank decided to raise its benchmark interest rate last week — ending the world’s last negative rate — pouring cold water on expectations that the bank would soon consider a second hike.
He favors a gradual process toward normalization, but keeping policy easy is not inconsistent with another rate hike, Bank of Japan board member Naoki Tamura said.
The Bank of Japan’s decision was a milestone that showed a virtuous price-wage cycle was in place, with sustainable inflation in sight, Kanda said, adding that strong wage gains during this year’s annual wage negotiations and record spending by companies were positive signs for Japan’s economy.
“Finally we are in an economic situation that enables the Bank of Japan to begin normalization,” Kanda said. “We have come a long way.”
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
RSS