Japan intensified its verbal defense of the yen which did little to prevent another sharp decline in the currency on Tuesday after it breached the 128 mark against the dollar.
Finance Minister Shunichi Suzuki said the Japanese currency was weakening rapidly and indicated that the impact of the moves could be harmful for the economy.
“There are positive aspects to it, but given the current economic climate, strong negative aspects exist,” Suzuki said. He referred to the soaring import costs and worsening condition of the bottom lines of business that can’t pass on increasing costs as a result of the weaker currency.
“We are monitoring moves in the foreign exchange market with a strong sense of vigilance,” he added.
However, his remarks did not do much to the stop decline of ht yen as it breached 128 against the dollar. Particularly, his remark that the movement of the yen is unto the market mechanism suggested authorities won’t go beyond verbal warnings
“Suzuki has been ramping up his comments on the yen, but it seems the markets currently view his words as nothing but talk,” said economist Takeshi Minami at Norinchukin Research Institute as reported by Bloomberg.
Tuesday marked the 13th day of yen falls against the dollar, the longest run of losses in Bloomberg data starting in 1971, after Federal Reserve Bank of St. Louis President James Bullard said the U.S. central bank shouldn’t rule out rate increases of 75 basis points to curb inflation.
“For the market, what would have the most impact is the BOJ raising rates, but to get there we still have a long way to go,” Minami said.
“The finance ministry is so far showing it isn’t going to actually intervene, so the market is likely thinking nothing’s going to be done and are moving accordingly.”
