Despite the Bank of Japan's decision on March 19 to end eight years of negative interest rates, the yen is on a downward trend.
Nathanael Ginting Eyestock | Getty Images
Japan's Finance Minister Shunichi Suzuki on Monday reiterated his warning against excessive yen depreciation, saying there had been speculative movements in currency markets that did not reflect economic fundamentals.
Suzuki told parliament, “We will closely monitor developments in the foreign exchange market with a strong sense of urgency, and we will respond appropriately to any excessive movements without excluding all options.''
Suzuki said that various factors are causing exchange rate fluctuations, including the Bank of Japan's decision to lift negative interest rates, Japan's current account balance, price fluctuations, geopolitical risks, market participants' sentiments, and speculative trading.
“Concerning the recent depreciation of the yen, I believe that there are some speculative movements that do not reflect fundamentals, considering economic and price trends at home and abroad,'' he said.
Despite the Bank of Japan's March 19 decision to end eight years of negative interest rates, the yen has been on a downward trend, hitting a 34-year low of 151.975 yen against the dollar last week. The dollar was trading at $151.315 early Monday morning.
With the Bank of Japan's policy rate still hovering around zero, analysts say the view that the gap between Japan and U.S. interest rates remains wide is giving traders an excuse to continue selling the yen.
Suzuki declined to comment when asked by a lawmaker whether the rapid depreciation of the yen after the Bank of Japan lifted negative interest rates was within or beyond expectations.
Suzuki said, “It is important for exchange rates to remain stable and reflect fundamentals. Excessive fluctuations are undesirable.''
The yen has rebounded since Japan's financial authorities held an emergency meeting on Wednesday to discuss the yen's weakness, bringing it forward from Thursday, issuing its strongest warning yet against excessive yen depreciation.
Japan intervened in foreign exchange markets in 2022, first in September and again in October, as the yen depreciated toward 152 yen to the dollar.
