After weeks of sharp weakness, the yen/dollar exchange rate on Friday (September 9) finally ushered in a sharp rebound. Japan’s central bank governor Kuroda Haruhiko said on the day that the rapid depreciation of the yen is not desirable, which means that Japanese policymakers have finally begun to raise their vigilance against exchange rate depreciation.
The Japanese government of Fumio Kishida also announced on Thursday that it will use 3.5 trillion yen (about 24 billion US dollars) of budget reserves to deal with the impact of inflation on the country.
USD/JPY tumbled more than 140 points all the way in intraday Asian trading, last trading around 142.75. Previously, the currency pair touched 144.98 on Wednesday, the highest level since 1998.
imply intervention in the currency market
Since the beginning of this year, the policy differences between Japan and the Federal Reserve have become wider and wider due to the dovish approach of the Bank of Japan. Market data show that so far this year, the yen has depreciated by more than 23%, making it the weakest one.
However, with the depreciation of the exchange rate gradually “out of control”, there are the latest signs that the Japanese decision-makers are beginning to “wake up”…
On Friday, Kishida met with Bank of Japan Governor Haruhiko Kuroda to discuss the economy and financial markets, including the foreign exchange market.
Haruhiko Kuroda emphasized after the meeting that the rapid depreciation of the yen is not desirable and will increase the uncertainty of enterprises.
The meeting showed that Japan’s level of vigilance has been raised. Kuroda said that he will pay close attention to the exchange rate trend.
Japanese Finance Minister Shun Suzuki also responded on Friday that he would take measures to deal with rising prices, and expressed concern about excessive fluctuations in the foreign exchange market. If the excessive fluctuations in the exchange rate continue, various measures can be taken.
Earlier, Japan’s Deputy Finance Minister for International Affairs Kanda Masato also warned on Thursday that he would not rule out any options if necessary if the recent foreign exchange market trend continued.
Trillion Yen Subsidy Program
The recent depreciation of the yen has been accompanied by an increase in the domestic inflation rate in Japan. And Japanese Prime Minister Fumio Kishida said on Thursday that the government will use 3.5 trillion yen in emergency reserves at the end of September to cushion the impact of rising food and energy prices on the economy.
The Japanese government is also planning to unveil another stimulus package in October, which is expected to be larger than the current funding package. Kishida said the government would consider preparing a supplementary budget “at an appropriate time” to fund the October bailout.
Kishida noted on Thursday that rising food and energy prices have had a major impact on consumers’ lives and business management, and promised Japan would “take seamless measures with a sense of urgency.”
According to Japanese media reports, cash payments to low-income households will be as high as 900 billion yen; regional governments will receive 600 billion yen in subsidies to implement inflationary measures across the country; in addition to providing gasoline subsidies and maintaining food and feed price ceilings .
A poll this week showed that dissatisfaction with Fumio Kishida in the cabinet has risen sharply by 7 percentage points to 41 percent, the first time Kishida has taken office since he took office.
Therefore, helping Japanese consumers to withstand the pain caused by rising global prices has become one of Kishida’s priority policies to promote Japan’s economic recovery and regain the support of the cabinet.