Japan authorities keep up warning against sharp yen decline

10:06 pm Tuesday, October 18th, 2022

By Chang-Ran Kim and Leika Kihara

TOKYO (Reuters) -Japanese authorities repeated their warnings about the yen’s precipitous fall against the dollar on Wednesday, with Finance Minister Shunichi Suzuki saying he was “meticulously” checking currency rates with more frequency, local media reported.

Speaking to reporters at the finance ministry, Suzuki said the government would “properly respond” in the foreign exchange market based on existing policy, according to the Japanese news agency Jiji.

Bank of Japan Governor Haruhiko Kuroda also repeated his usual line that stability in the foreign exchange market was “extremely important”, characterising the yen’s recent softening as sharp and one-sided.

“This kind of yen weakening makes it difficult for companies to set their business plans and raises uncertainties in their outlook,” he told a parliamentary committee. “This is negative for our economy and not desirable.”

The comments came as the yen traded near a 32-year trough to the dollar at 149 yen, putting the major psychological barrier of 150 in focus.

In a speech delivered later on Wednesday, BOJ board member Seiji Adachi said it was premature to shift away from the central bank’s ultra-loose monetary policy with Japan’s economy facing heightening risks from slowing global growth and volatile financial markets.

Responding to short-term currency moves with monetary policy would heighten uncertainty over the BOJ’s policy guidance and do more harm to the economy, Adachi said, brushing aside the chance of raising interest rates to reverse the yen’s downtrend.

“When looking at the global financial and economic environment surrounding Japan, downside risks are building up rapidly,” Adachi said in the speech.

“When downside risks are so high, we should be cautious of shifting toward monetary tightening,” he said, warning that heightening external headwinds risked tipping Japan back to deflation.

(Reporting by Kantaro Komiya, Chang-Ran Kim and Leika Kihara; Editing by Gerry Doyle and Jacqueline Wong)