## Japan's Monetary Authorities Hold Emergency Meeting to Discuss Weak Yen
Amidst growing concerns over the weakening yen, Japan's three main monetary authorities – the Bank of Japan (BOJ), the Finance Ministry, and the Financial Services Agency – convened an emergency meeting on Wednesday. The meeting aimed to discuss the recent decline of the yen and potential measures to address the situation.
During the meeting, top currency diplomat Masato Kanda emphasized the authorities' readiness to intervene in the market to counter "disorderly and speculative moves" in the currency. He also highlighted the BOJ's potential response through monetary policy if currency fluctuations significantly impact the economy and price trends.
The yen's depreciation has continued despite the BOJ's historic shift away from negative interest rates last week. While a weaker yen benefits exports by making them cheaper, it also pushes up the prices of energy and other imports, fueling inflation and increasing the cost of living. This undermines the BOJ's objective of achieving sustainable 2% inflation through wage growth and improved household purchasing power, rather than cost-push inflation.
Finance Minister Shunichi Suzuki echoed the urgency, stating that authorities could take "decisive steps" against yen weakness. He made these remarks following a surge in the dollar due to strong U.S. economic data.
Market analysts believe that the risk of intervention is high, given the yen's recent decline to a 34-year low against the dollar. They suggest that inaction from Tokyo could encourage further depreciation of the yen.
BOJ Governor Kazuo Ueda acknowledged the impact of currency movements on the economy and prices. He assured that the central bank would closely monitor developments in the foreign exchange market.
The yen's weakness has also triggered concerns about its impact on other currencies. National Australia Bank forex strategists noted that the recent sharp drop in China's yuan might be a policy response to maintain the competitiveness of Chinese exports.
Despite the BOJ's recent interest rate hike, the next increase is not expected for some time. This has further fueled the yen's use in carry trades, where investors borrow in low-interest-rate currencies and invest in higher-yielding ones. Additionally, Japanese investors are seeking stronger returns abroad, further weakening the yen.
The yen's depreciation has made it the worst-performing major currency this quarter, with a decline of over 7% against the dollar. The authorities' emergency meeting and potential intervention signal their commitment to stabilizing the yen and mitigating the negative economic consequences of its weakness.