Japan’s financial authorities are not mincing words when it comes to the recent volatility in the foreign exchange market. Finance Minister Satsuki Katayama has issued her most robust warning yet to currency speculators, emphasizing that Japan possesses a ‘free hand’ to intervene decisively if market movements stray from economic fundamentals.
This strong statement comes on the heels of the yen’s perplexing weakening, an unexpected turn of events even after the Bank of Japan recently raised interest rates. Typically, higher interest rates would strengthen a currency, making the yen’s decline a cause for concern among policymakers.
In an interview with Bloomberg on Monday, Minister Katayama directly addressed the situation, stating, ‘The moves were clearly not in line with fundamentals but rather speculative.’ She was specifically referring to a notable and sharp depreciation of the yen observed just last Friday.
Her comments serve as a clear signal that Tokyo is closely monitoring the yen’s performance and is prepared to take ‘bold action’ should speculative forces continue to dominate the market, rather than genuine economic indicators. This underscores Japan’s commitment to maintaining currency stability and preventing excessive, rapid fluctuations that could harm its economy.
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