Kanda Warns Yen Weakness Unrelated to Japan's Fundamentals

Masato Kanda, Japan's Vice Finance Minister for International Affairs and the nation's top currency diplomat, has expressed concern over the recent depreciation of the yen, asserting that the currency's weakness does not align with the economic fundamentals. Kanda highlighted that the yen's decline, which has been attributed to speculative trading, adversely affects the Japanese economy, particularly by increasing the cost of imports and potentially impacting people's livelihoods.

Although Kanda did not indicate a specific exchange rate level at which the government would intervene to defend the yen, he indicated that Japan stands ready to take appropriate measures to counter speculative moves and stabilize the currency market. His remarks come in the wake of the yen's drop to a near 32-year low in October 2022, when Japan last intervened in the currency market.

The dollar has seen a 4% rise against the yen over the past two weeks, with the yen's weakness being partly perceived as a result of market expectations that the Bank of Japan is unlikely to raise interest rates following the end of its negative interest rate policy. Kanda's comments are seen as a more assertive stance from the Finance Ministry, signaling a potential readiness to direct the Bank of Japan to act against unwarranted volatility in the currency market.