Japan plans to use $24 billion of its emergency reserves to offset the economic impact of soaring food and energy prices.
Japanese Prime Minister Fumio Kishida announced the move Thursday, adding that the government will provide 50,000 yen in financial support to households exempt from paying resident taxes.
Tokyo is also poised to take action in the foreign exchange market after the yen fell to a 24-year low in recent weeks, the country’s top currency diplomat revealed.
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Deputy Finance Minister for International Affairs Masato Kanda said the government has not ruled anything out as it seeks to address its currency’s “clearly excessive volatility”.
“Forex market volatility has been increasing lately. In the past few days in particular, we’ve seen one-sided rapid yen declines fueled by speculative moves. It’s clearly a move that can be described as excessive volatility,” Kanda told reporters.
“The yen’s recent rapid moves cannot be justified by fundamentals,” he said, adding that the government and Bank of Japan are “extremely concerned” about the currency’s plunge.
“If such steps continue, the government is ready to take action in the foreign exchange market and will not rule out any action,” he said.
When asked if intervention through yen purchases was a possibility, Kanda said: “As I said, we are not ruling out any option.”
Kanda made the comments after attending a meeting of finance ministry officials Bank of Japan and the Financial Services Agency (FSA) on Thursday to discuss global financial markets.
Yen continues to fall
Such meetings are held on an ad hoc basis, usually to signal the government’s concerns about rapid exchange rate movements to the markets. After the meeting ended, no written statement was made.
“We will look at market movements daily and if we think something is wrong, we will take appropriate action,” Kanda said when asked how long volatility would need to last for Tokyo to trade.
The dollar fell as low as 143.43 yen after Kanda’s comments before rebounding to around 144 yen. It last traded at 144.02 yen, below Wednesday’s 24-year high of 144.99 yen.
Authorities have been louder in their rhetoric about the yen’s plunge, but failed to slow its decline as investors remained focused on the policy divergence between the US Federal Reserve’s aggressive rate hikes and the BOJ’s determination to maintain ultra-loose monetary policy.
“Kanda’s speech didn’t sound like Tokyo was ready to intervene immediately, which is why the dollar surged back above 144 yen,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securitiessaid.
Once a welcome boost for exporters, the weakness of the yen is a growing headache for Japanese policymakers as it pushes up the cost of already expensive fuel and commodity imports.
- Reuters with additional editing by Sean O’Meara
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Sean O’Meara
Sean O’Meara is a contributing editor at Asia Financial. He has been a newspaperman for over 30 years, working for local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.
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