A Japanese official asserts that there is no such thing as a ‘good or poor’ exchange rate as the yen weakens.
TOKYO (Reuters) -On Wednesday, a top Japanese government official said that there is no such thing as “good or terrible” currency rates, implying that Tokyo is not prepared to take urgent measures to shore up the sinking yen. It has long been the government’s position that sudden changes in currency rates are bad, and Deputy Chief Cabinet Secretary Seiji Kihara told Reuters today that the government will always keep an eye on the effects of a weaker yen on the economy.
When questioned about mounting fears that the sinking yen was becoming a problem for Japan—notably from the country’s own finance minister, Shunichi Suzuki – Kihara said, “There is no such thing as a good or poor exchange rate.” “Stability is critical.”
A weak yen, which was once a good thing for Japan’s export-driven economy, has suddenly made imported goods more expensive, especially gasoline, in the middle of the Ukraine crisis. This could hurt the country’s fragile economic recovery by hurting consumers and businesses.
The dollar reached a new two-decade high against the yen on Wednesday of 129.43 yen, up from approximately 114 yen at the start of March.
According to some speculators, a slide below 130 yen might prompt authorities to act to support the currency. However, some question whether such operations would be sufficient to reverse the economy’s decline for an extended period, given that the US Federal Reserve is due to tighten policy and the Bank of Japan is likely to maintain an ultra-loose policy for an extended period.
Kihara refused to comment on the causes of the yen’s weakening or whether current changes were swift enough to justify authorities’ intervention, stating that he was unable to respond since currency officials were responsible for acting correctly on a daily basis.
Interventions in the yen market have been very infrequent. Japan last intervened to protect its currency in 1998, during the Asian currency crisis. Japan has been absent from the market since 2011, when it intervened significantly to bring the yen’s strength under control after a severe earthquake that created a nuclear crisis.
