'US Inflation Shock' Despite Verbal Intervention in Japan's Forex Market, Yen Approaches 145 per Dollar

Yen Plummets on US CPI Surpassing Expectations... Japan's Ministry of Finance "Monitoring Foreign Exchange Market Trends"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Ji-eun] As the yen exchange rate approached the 145 yen per dollar mark due to the shock of US inflation, Japan's Ministry of Finance official expressed intentions to respond to the exchange rate movements.

According to Bloomberg on the 14th, Masato Kanda, an official at Japan's Ministry of Finance, stated, "We will not exclude any options and will respond appropriately to rapid yen fluctuations," adding, "We are closely monitoring the situation with urgency."

On that day, in the Tokyo foreign exchange market, the yen exchange rate surged to 144.58 yen per dollar at one point during trading, nearing 145 yen. This is analyzed to be due to continued selling of the yen amid expectations that the US Federal Reserve's tightening stance will persist, following the US August Consumer Price Index (CPI) exceeding market expectations (8.0%).

In response, the Japanese government showed caution against the yen's weakness by engaging in verbal interventions, but failed to stop the downward trend in the currency's value. Bloomberg reported, "In a situation where the dollar's value continues to rise, it is difficult to expect the yen's value to recover to the 140 yen range through verbal interventions alone." This is because, contrary to the US's monetary tightening stance, the Bank of Japan (BOJ) is maintaining a large-scale monetary easing policy, exerting strong downward pressure on the Japanese yen.

However, some believe that the likelihood of the Japanese government directly intervening in the foreign exchange market is low. Citing economists' analyses, Bloomberg stated, "Currently, the Japanese government holds more foreign exchange reserves than it did when it first intervened in the foreign exchange market in 1998," but added, "It is unlikely that the Japanese government's intervention alone, without US assistance, can reverse the yen's weakening trend." In 1998, when the yen exchange rate rose to 146.78, the Japanese government intervened in the foreign exchange market by purchasing over 3 trillion yen and selling dollars, actively implementing currency defense policies.

Matt Simpson, a market analyst at Citi Index, also forecasted that it would be difficult to stop the yen's weakening trend due to the Fed's interest rate hike stance and expectations for dollar investment returns.

This content was produced with the assistance of AI translation services.