Japan concerned about weak yen’s negative effects, Finance Minister says

Japan is concerned about negative effects of the weak yen, Finance Minister Shunichi Suzuki said on Friday, in a fresh warning against speculators as the currency has continued to slide to lows last seen more than three decades ago.

“The weak yen has both positive and negative impacts (on the economy),” Suzuki told a press conference. But the finance minister said he is “more concerned about the negative effects right now,” noting that measures to combat surging prices are key policy priorities for the government.

While a weak yen boosts exports, it has become a headache for Japanese policymakers as it inflates the cost of living for households by pushing up import prices.

Suzuki said he could not comment on specific policy measures on foreign exchange, but that authorities were closely watching currency moves and stood ready to take action.

The yen has sunk to 34-year low against a broadly firmer dollar, driven by wide U.S.-Japan interest rate differentials. The yield-induced downturn in the yen has gained renewed momentum on signs the Bank of Japan will go slow on raising its near-zero rates and expectations the U.S. Federal Reserve will likely delay the start of its rate-cutting cycle.

The BOJ is widely expected to keep policy settings steady following a two-day meeting that ends later in the day, leaving markets focussed on any hints from governor Kazuo Ueda on how the weak yen could affect the next rate hike timing.

The yen is now firmly past 155 to the dollar, a level seen by traders as a line in the sand that would prompt Tokyo to intervene in the markets. It is down 9.4% on the dollar this year and has lost more than 33% of its value in three years.

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Traders figure there is not much Tokyo can do to reverse the currency’s slide while interest rates and momentum are heavily skewed against it.

Suzuki declined to comment on remarks made by U.S. Treasury Secretary Janet Yellen that the U.S. dollar has been strong and interventions by other governments in currency markets is acceptable only in rare and extraordinary circumstances.

At the parliament later in the day, Suzuki said while foreign exchange levels reflect various factors including economic indicators and price trends, interest rate differentials remain the crucial determinant.

Japan last intervened in the currency market in 2022, spending roughly $60 billion to defend the yen.