Yen’s Slide Past 150 To Dollar Prompts Stern Warnings From Japan

(Bloomberg) -- The yen weakened past 150 per dollar for the first time since November, prompting the strongest pushback from Japanese officials in months, as hotter-than-expected US inflation doused bets on an early Federal Reserve interest rate cut.

The Japanese currency rose about 0.2% to 150.52 against the dollar around noon Wednesday in Tokyo after a 1% plunge overnight that was part of a broader slide in Group of 10 currencies against the dollar. The continued strength in US prices buoyed speculation that the Fed will need to keep interest rates at two-decade highs for several more months, boosting the relative appeal of holding cash in higher-yielding dollars.

Read more: Traders Pull Back Bets on Fed Interest-Rate Cuts Before July

The exchange-rate move triggered a flurry of verbal warnings from Tokyo’s most senior currency officials.

“Some of the recent rapid moves are in line with fundamentals, but some are clearly speculative. I think the latter aren’t desirable,” vice finance minister for international affairs Masato Kanda told reporters Wednesday.

“Authorities are ready to respond 24 hours a day, 365 days a year,” he added, in his strongest remarks on the currency since November.

His comments were reinforced by Finance Minister Shunichi Suzuki shortly afterwards. The yield on 10-year Japanese debt briefly touched 0.765%, the highest since mid-December, suggesting that investors see slightly more chance of an early move by the Bank of Japan to raise interest rates.

While a weaker yen has helped foster inflation and benefited exporters, Japanese policymakers are on guard against sharp moves lower, which can disrupt the economy and markets.

No Hurry

The yen has come under renewed pressure after BOJ Deputy Governor Shinichi Uchida said last week that it’s hard to see the bank raising its policy rate continuously and rapidly. The Japanese currency has sunk over 23% over the past two years, more than any major currency tracked by Bloomberg.  

Uchida also said that financial conditions will remain accommodative — a view expressed also by Governor Kazuo Ueda — even after the BOJ ends its negative-rate policy, given the current outlook for the economy and inflation. 

“Concerns are growing about verbal intervention from the Japanese authorities and market players would need to assess the intensity of the warning from here,” said Keiichi Iguchi, a senior strategist at Resona Holdings Inc. “Some nervousness will prevail among investors due to intervention concerns.”

The yen has tumbled more than 6% versus the dollar so far in 2024, the biggest loser among G-10 currencies. The Japanese currency fell to as low as 150.89 on Tuesday. It has fallen 3.5% versus the euro, also the worst performance among developed-nation peers.

Japanese authorities stepped into the foreign-exchange market in September and October of 2022, in their first efforts to prop up the currency since 1998, and spent around ¥9 trillion ($60 billion).

“The market’s really geared up for yen bullishness on expectations of the Bank of Japan exiting its negative interest rate policy, but they’re not going to be in a hurry to do it and they’re not going to rush into a prolonged normalization cycle,” said Tom Nakamura, a portfolio manager at AGF Investments Inc., adding that expectations for yen strength based on actions by the country’s central bank should start to be unwound.

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