Japan on Thursday ramped up its verbal warnings against the yen's rapid fall versus the U.S. dollar, saying "all options" are on the table to prevent exchange rate volatility from dealing a blow to the economy.
After the yen plunged past 153 to a 34-year low against the dollar, Finance Minister Shunichi Suzuki said currency moves should be stable reflecting economic fundamentals, adding that the government is closely watching yen moves and factors behind them "with a high sense of urgency."
"We are not just looking at whether the yen passed 152 or 153, but also the background to it," Suzuki told reporters. "We will take appropriate action against excessive volatility without ruling out all options."
Suzuki said he shares information "frequently" with Masato Kanda, Japan's top currency diplomat, over developments in the foreign exchange market.
Kanda, vice finance minister for international affairs, described the yen's fall as "rapid," but refrained from commenting on whether a move of 1 yen in a day is considered an excessive level that could trigger a fresh round of market intervention.
The latest verbal warnings came after the yen was put under renewed selling pressure versus the dollar as stronger-than-expected U.S. inflation data scaled back market expectations that the Federal Reserve will start cutting interest rates as soon as in June.
Caution over possible market intervention by Japan for the first time since 2022 grew after the remarks, with Japanese authorities having stepped in by buying the yen for the dollar when the Japanese currency weakened to near 152 yen that year.
But the immediate market reaction to the comments by the finance minister and the vice finance minister was limited. The dollar, which jumped over 1 yen overnight to 153.24 yen, was trading in the upper 152 yen zone.
Suzuki also said the yen's weakness can be both positive and negative, but he expressed concern about its impact on inflation amid a rising cost of living.
Japanese companies expect the dollar to trade at 141.42 yen for the year to March 2025, according to the latest Bank of Japan's Tankan survey.
The weaker yen has been one of the major reasons why Japan has seen the inflation rate elevated, raising import costs.
"Japan has been coping with rising prices. I'm always interested in and concerned about the impact of the weaker yen on inflation," Suzuki told a parliamentary session.
Despite the BOJ's symbolic first rate increase in 17 years at its policy meeting in March, the yen has met continued selling pressure.
"The yen has moved to great a extent since the beginning of this year," Kanda said.
Some market analysts say the yen's sharp drop could prompt another interest rate hike by the BOJ.
Governor Kazuo Ueda has said the Japanese central bank will not guide monetary policy to control foreign exchange rates but would consider a response if the impact of the yen's moves on the economy and prices cannot be ignored.
The wide interest rate gap between Japan and the United States has been blamed for the yen's depreciation.
The BOJ made a historic turn away from unorthodox monetary easing steps that had sharply weakened the Japanese currency but it plans to keep financial conditions "accommodative" to attain its 2 percent inflation target, aided by robust wage growth that can help households withstand rising prices.
A weak yen cuts both ways for Japan. It boosts the overseas earnings of Japanese exporters in yen terms but it also inflates import costs, in a blow to resource-scarce Japan.
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Yen sinks to 153 range vs. dollar, 1st time in 34 years
