Japan enters market for first time in 24 years to rein in rising dollar
In a rare move last seen in 1998, Japan on Thursday intervened in the foreign exchange market by buying yen in a bid to shore up the depreciating currency.
The intervention came shortly after the Bank of Japan hinted that it would leave the country’s ultra-low interest rates at near zero for the next couple of years.
Japan, the world’s third-largest economy, is affected by the strong US dollar, which has appreciated against most major currencies following the US Federal Reserve’s repeated interest-rate hikes in recent months.
The runaway appreciation of the American greenback is making Japan pay more for essential imports, such as oil, natural gas and food, which have seen far higher costs in yen terms.
“We have taken decisive action [in the exchange market],” Japan’s vice finance minister for international affairs Masato Kanda told reporters on Thursday.
The intervention pushed the US dollar down by over 2 per cent, to trade at around 141 yen from 146 yen following the Japanese central bank's decision to stick to its super-loose policy stance.
Japan’s last previous intervention to support its currency was in 1998, when the Asian financial crisis triggered a yen sell-off and rapid capital outflow from the region.
As of Thursday evening Tokyo time, the yen was trading at around 142.65 to the dollar.
The Japanese currency has depreciated nearly 20 per cent this year, sinking to 24-year lows. Earlier this year, the yen traded at around 115 against the dollar.
On Wednesday, the US Federal Reserve raised its policy interest rate by 75 basis points — its third straight hike this year. It also signalled more increases in the near future. The US move was viewed as its resolve not to let up in its battle against inflation while giving a further boost to the dollar.