Will The Bank Of Japan Intervene With The Yen?

Talk of intervention by the Bank of Japan is heating up as the Yen remains near a 34-year low against the U.S. dollar. The Yen reached a level of 151.97 against the U.S. dollar on Wednesday, something not seen for the currency pair since 1990. After hitting that level the Yen pared some of its losses, but remains at the 151.38 level late Thursday in New York.

Even during the Asian currency crisis of 1997 the Yen didn’t reach such levels, although it was recently as low as 151.95 in October 2023.

The continued weakness in the Yen, even as Japan’s central bank has abandoned negative interest rates for the first time in 17 years, and expectations for U.S. interest rate cuts increase, is driving the speculation for the BoJ to intervene in currency markets and prop up the Yen. Recently Japan’s finance minister Shunichi Suzuki indicated that measures to “respond to disorderly FX moves” were not off the table.

On Wednesday Masato Kanda , the vice finance minister for international affairs said that the moves in the Yen are being closely and urgently monitored by Japanese policymakers. He noted that recent moves in the Yen, which have been as large as 4% in two weeks, have been seen as excessively volatile. BoJ members have also spoken against the recent volatility, saying that if currency fluctuations begin impacting the economy the BoJ would react with monetary policy changes.

While many global analysts admit that intervention is the likely course for the Yen in the short-term, they also point out that it isn’t a long-term solution. They also point out that there are some upsides to the weaker Yen such as increased tourism and a stronger stock market.