Bank of Japan Governor Kazuo Ueda recently responded to questions at a news conference following a surge in the yen against the dollar, as traders pointed to intervention by Japanese authorities to elevate the yen, which has been at low levels for over three decades. This sudden jump in the yen led to a significant drop in the dollar's value, as Japanese banks were observed selling off dollars in exchange for yen.
Despite the Finance Ministry of Japan being unavailable for immediate comment due to a holiday, the actions in the currency market reflect a concern to support the yen, which has experienced an 11% decline against the dollar this year. Governor Kazuo Ueda clarified during a recent meeting that while monetary policy does not directly focus on currency rates, the volatility in exchange rates could have notable economic consequences.
Japanese intervention in the currency market has been evident with three instances in 2022 when the country sold dollars to acquire yen, addressing the yen's decline towards its lowest levels in over three decades. As U.S. interest rates have risen while Japan's have remained close to zero, there has been a shift of funds from yen to dollars to benefit from the interest rate differentials, also known as the "carry trade." Moreover, recent discussions between the United States, Japan, and South Korea aimed to closely monitor currency markets, signaling a collective approach towards addressing significant currency fluctuations.