The Bank of Japan (BOJ) stepped closer to currency intervention yesterday than at any time in the last five years by checking exchange rates with commercial banks as the yen rallied to a 14-year high against the dollar.
Still, market sources said intervention was highly unlikely in the short term and that authorities were instead aiming to temper the sentiment driving the yen higher.
While the central bank made its presence known in the market, Japanese Finance Minister Hirohisa Fujii raised the prospect of a G7 joint statement on currencies to cool the yen’s rally.
PHOTO: REUTERS
The dollar slumped to a low of ¥84.82 as investors shunned riskier assets after news about Dubai’s debt problems, but it pared its losses after Fujii’s comments because his rhetoric was sharper than it had been on Thursday.
G7 countries issued a statement in October last year when the yen rallied against other major currencies, so traders and analysts said a joint statement was possible.
But joint intervention was extremely unlikely, they said. Such action might send the wrong signal at a time when the G7 wants to encourage China to let the yuan rise by maintaining flexible currency markets.
Unilateral intervention by Japan was also unlikely because the yen’s rise is largely the result of the dollar’s broad weakness, and the BOJ would not have enough financial firepower to reverse the dollar’s decline.
The mere threat of joint action though was enough to curb the yen’s gains against the dollar, traders said.
“I would respond flexibly to a joint statement on currencies,” Fujii told reporters after a Cabinet meeting.
Fujii said he was also flexible about contacting currency authorities in the US and Europe, adding that he was very nervous about currency moves and it was possible Japan could respond.
He declined to comment on intervention, saying he was not in a position to use the word due to commitments with other G7 countries on currency flexibility.
Market sources said the government and the Bank of Japan had checked dollar-yen rates with commercial banks, going beyond their usual practice of market contact than at any time since authorities intervened earlier this decade to curb yen strength from harming exports.
That intervention came to a stop in March 2004 after authorities dumped ¥35 trillion over 15 months.
During that period, the finance ministry and the BOJ often checked rates as a prelude to intervention.
“The Bank of Japan may have wanted to make its presence felt,” a trader said of yesterday’s rate checking.
The dollar has been in a long-term decline. Against a basket of major currencies it hit a 15-month low on Thursday.
“I would not be surprised if the G7 or the Group of 20 issues a statement to prevent the dollar from weakening further, although it is unclear if they will act now or wait until a G7 meeting in February,” said Koji Fukaya, a senior currency strategist at Deutsche Securities in Tokyo. “But the statement would unlikely be the kind issued in October last year, because the current situation stems from a weak dollar.”
The yen has risen 5.3 percent since the end of last year. In trade-weighted terms, its rise is also modest with the currency well below highs hit in January.
“I have not heard of intervention at this point but in the future there will be various options and if necessary I’ll talk to ministers involved,” Japanese National Strategy Minister Naoto Kan told reporters.
The dollar’s decline against major currencies has been more pronounced, and traders say its slump against the yen is more a symptom of worries that low US interest rates are fostering economic bubbles and that chances of a Dubai debt default are reigniting financial turmoil.
“I can’t see what purpose dollar/yen intervention would serve,” said Hideki Amikura, executive director of foreign exchange services at Nomura Trust & Banking Co in Tokyo.
TAIWAN IS TAIWAN: US Representative Tom Tiffany said the amendment was not controversial, as ‘Taiwan is not — nor has it ever been — part of Communist China’ The US House of Representatives on Friday passed an amendment banning the US Department of Defense from creating, buying or displaying any map that shows Taiwan as part of the People’s Republic of China (PRC). The “Honest Maps” amendment was approved in a voice vote on Friday as part of the Department of Defense Appropriations Act for the 2026 fiscal year. The amendment prohibits using any funds from the act to create, buy or display maps that show Taiwan, Kinmen, Matsu, Penghu, Wuciou (烏坵), Green Island (綠島) or Orchid Island (Lanyu, 蘭嶼) as part of the PRC. The act includes US$831.5 billion in
‘WORLD WAR III’: Republican Representative Marjorie Taylor Greene said the aid would inflame tensions, but her amendment was rejected 421 votes against six The US House of Representatives on Friday passed the Department of Defense Appropriations Act for fiscal 2026, which includes US$500 million for Taiwan. The bill, which totals US$831.5 billion in discretionary spending, passed in a 221-209 vote. According to the bill, the funds for Taiwan would be administered by the US Defense Security Cooperation Agency and would remain available through Sept. 30, 2027, for the Taiwan Security Cooperation Initiative. The legislation authorizes the US Secretary of Defense, with the agreement of the US Secretary of State, to use the funds to assist Taiwan in procuring defense articles and services, and military training. Republican Representative
Taiwan is hosting the International Linguistics Olympiad (IOL) for the first time, welcoming more than 400 young linguists from 43 nations to National Taiwan University (NTU). Deputy Minister of Education Chu Chun-chang (朱俊彰) said at the opening ceremony yesterday that language passes down knowledge and culture, and influences the way humankind thinks and understands the world. Taiwan is a multicultural and multilingual nation, with Mandarin Chinese, Taiwanese, Hakka, 16 indigenous languages and Taiwan Sign Language all used, Chu said. In addition, Taiwan promotes multilingual education, emphasizes the cultural significance of languages and supports the international mother language movement, he said. Taiwan has long participated
The paramount chief of a volcanic island in Vanuatu yesterday said that he was “very impressed” by a UN court’s declaration that countries must tackle climate change. Vanuatu spearheaded the legal case at the International Court of Justice in The Hague, Netherlands, which on Wednesday ruled that countries have a duty to protect against the threat of a warming planet. “I’m very impressed,” George Bumseng, the top chief of the Pacific archipelago’s island of Ambrym, told reporters in the capital, Port Vila. “We have been waiting for this decision for a long time because we have been victims of this climate change for
RSS