Photo/Illutration A display shows the foreign exchange trading trend on Sept. 8. (Tsubasa Setoguchi)

The recent plunge in the value of the yen against the U.S. dollar led market insiders to focus on a meeting Sept. 9 between Prime Minister Fumio Kishida and Haruhiko Kuroda, the governor of the Bank of Japan.

But after the 30-minute meeting, Kuroda told reporters the prime minister made no specific instructions or requests to deal with the plummeting yen.

“To have the foreign exchange market move by two or three yen in a day is a rapid change indeed,” Kuroda noted. “Such rapid fluctuations cause instability in company management, which is not desirable as that heightens uncertainty about the future.”

Similar foreign exchange market speculation occurred the previous day when a hastily arranged meeting was held involving high-ranking officials of the Finance Ministry, Financial Services Agency and BOJ. It was the first such meeting in three months.

After the meeting, Masato Kanda, the vice minister of finance for international affairs who is in charge of foreign exchange policy, met with reporters.

“There has been a one-sided and sudden weakening of the yen due to speculative moves over the past few days,” Kanda said. “If this trend continues, we are prepared to take all necessary measures in the foreign exchange market. I’m not ruling out any possible measures.”

While the yen momentarily strengthened against the dollar when reports emerged about the planned meeting, the yen weakened back to 144 yen to the dollar afterward.

The decline in the value of the Japanese currency stems from the BOJ being the odd man out among central banks in terms of interest rates.

The European Central Bank and U.S. Federal Reserve Board have raised interest rates in recent months, leading to a selling of yen to purchase dollars.

Between Sept. 6 and 7, the Japanese currency fell by 4 yen against the dollar and moved to 144 yen to the dollar.

The BOJ insists that its monetary easing measures are needed to help the Japanese economy recover from the effects of the novel coronavirus pandemic.

The U.S. Federal Open Market Committee has raised interest rates in four straight meetings since March and another hike is expected in the meeting to be held Sept. 20-21.

The interest rate hikes are designed to help the economies cope with rapid inflation caused in part by the Russian invasion of Ukraine.

According to figures compiled by SMBC Nikko Securities Inc. with regard to 84 central banks around the world, at least 30 hiked interest rates every month between May and August.

But BOJ officials are reluctant to follow suit due to concerns any hike would further hurt the economy.

The BOJ is scheduled to hold a monetary policy meeting Sept. 21-22, but the central bank is expected to maintain its current policy.

(This article was written by Masatoshi Toda, Ryuhei Tsutsui and Shinya Tokushima.)

Related News