Japan’s government on Friday warned of the fallout from the yen’s rapid depreciation after the currency tumbled to a new 24-year low against the US dollar, saying it is ready to take ‘appropriate action’ to bring stability in collaboration with the monetary authorities of other countries. nations.
Volatility in foreign exchange markets has “increased somewhat”, Finance Minister Shunichi Suzuki told a news conference, adding that the government was monitoring currency movements “with a heightened sense of vigilance”.
“We have agreement among the Group of Seven and others that excessive volatility and disorderly movements in exchange rates can negatively impact economic and financial stability,” Suzuki said.
Aggressive interest rate hikes by the US Federal Reserve weakened the yen against the dollar as the Bank of Japan said it did not plan to change its ultra-low rate policy. The Fed is expected to continue to rise, putting more pressure on the yen.
The US dollar was trading in the lower 140 yen zone on Friday.
A weak yen is a double-edged sword for Japan as it helps exporters by increasing overseas profits once repatriated, but it also inflates import costs for energy and other raw materials, a puzzle for resource-scarce Japan.
Japan’s top government spokesman, Hirokazu Matsuno, reiterated that currency movements should be stable and reflect economic fundamentals, adding, “Rapid fluctuations are not desirable.”
The yen’s breakout of the psychologically important 140 line is seen by some forex analysts as a sign that further falls could follow, with US economic data becoming sharper for any hint at the pace of further rate hikes by the Fed.
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