It is a moment of truth for the Japanese authorities as the Yen hits a critical zone. The currency exceeded the 150 psychological level on Thursday, causing the government to intervene. Accordingly, investors are anxiously waiting for what will happen now.
Yen Slides Past A Crucial Level
A 1990 phenomenon saw the Yen break past a symbolic border. As a result, Japan’s government made futuristic preparations to prevent its recurrence. Masato Kanda, Japan’s Vice Finance Minister and a currency expert had an interview with reporters on Thursday.
While being interviewed, Kanda said the Yen’s inordinate irregularities had become unbearable. To this end, the government devised a strategy to curb the situation during an uprising. Although, the VFM refused to disclose whether the government has ventured into the market again.
With the Yen breaching a crucial range again, markets are on high alert. Investors are steadily monitoring Tokyo’s possible resolve for another Yen buyout. In addition, the currency’s frequent slide has led to a rise in importation costs.
Besides, it has drawn attention to Japan preceding its central bank meeting next week. Here, analysts expect the policymakers to maintain their low-interest rates policy—a move considered contributing to the Yen’s gloomy condition.
Following Yen’s recent crash, Shinuchi Suzuki, Japan’s Finance Minister, pledged to contain its cascades. He said he would implement a measure to ensure the Yen’s moves were under control. Suzuki added that it is unacceptable to watch speculations influence volatility in the market.
BoJ’s Policy Impact On The Yen
In addition, the Finance Minister said he would keep a close watch on the Yen’s performance.
Since the start of 2022, the USD has climbed 30% against the Yen. Notwithstanding, Japan expended $19.7 billion or 2.8 trillion Yen in September during its intervention in the currency. Moh Siong Sun reasserted that the 150 boundary was a psychological zone.
As a result, crossing it will demand immediate attention from the government. For now, traders and investors are psyched about the conflicted possibility of an intervention. However, if there is one, they will edge the currency higher.
Earlier Thursday, BoJ suggested an emergency bond purchase scheme to protect its 0 percent bond cap yield. Meanwhile, Haruhiko Kuroda, the bank’s chief, constantly declined offers to desist from his dovish stance. The bank’s move underlines the problem Tokyo encounters attempting to curb Yen’s decline.
Last month’s intervention was the first of its kind after 1998. Japan’s finance ministry has not entered the market since it went in then due to high volatility. Japan’s authorities monitor Yen’s momentum instead of marking a specific level to intervene.
Analysts believe the Yen will continue in a slump as long as BoJ maintains its ultra-low policy. BoJ is divergent among a long list of Federal Reserves hiking rates points. A choice analysts opined is behind the Yen’s pickle.