On Friday, Japan's Finance Minister Taro Aso stated that despite the undesirability of sudden fluctuations in exchange rates, currency trends should be determined by the market itself. With the yen weakening and leading to increased import costs, he did not explicitly indicate a willingness to intervene in the market to stabilize the weak yen.
Taro Aso mentioned that exchange rates should reflect the fundamentals of the economy, and his current view on the yen's exchange rate has not changed, aligning with the government's consistent stance. Aso's comments come as a surprise to the financial markets, especially as the dollar fell below 145 yen, a level that triggered Japan's first market intervention in 24 years last September.
Daisaku Ueno, chief forex strategist at Mitsubishi UFJ Securities, noted that Aso's stance lacked a clear determination, hinting that Japanese authorities might consider intervention only if the dollar to yen exchange rate falls to a near 32-year low.
Some participants in the currency market believe that Japanese authorities might take relevant policy measures to address the impact of the weak yen on rising import costs, such as maintaining gasoline subsidies to mitigate price increases on consumers.
Although the Japanese government has stated that a weaker yen could help attract more foreign tourists, thus boosting Japan's tourism and service industries, many market participants speculate that the primary reason for allowing the yen to depreciate could be pressure from the United States.
Recently, as investors bet that the Federal Reserve might continue to raise interest rates or maintain higher rates to control inflation, and the Bank of Japan continues its ultra-loose monetary policy, the yen has remained weak. The market is closely watching whether Japanese officials will take intervention actions to stabilize the weak yen.
The weakened yen has already led to increased costs for fuel and food imports in Japan, weakening consumer purchasing power. Prime Minister Fumio Kishida is actively taking measures to subsidize retail gasoline prices and alleviate the pressure of rising utility costs.
