Japan is watching foreign exchange movements with a heightened sense of vigilance and is ready to take appropriate steps to counter excessive volatility, Finance Minister Shunichi Suzuki said Thursday after the yen plunged to a 32-year low against the U.S. dollar.
Speaking to reporters after meeting with his counterparts from the Group of 20 major economies, Suzuki stuck to his view that excessive fluctuations, led by speculators, cannot be tolerated.
Stronger-than-expected U.S. consumer inflation data, released Thursday, boosted market expectations of aggressive rate hikes by the U.S. Federal Reserve as it battles to rein in soaring inflation.
"We are closely watching market developments with a sense of heightened vigilance. We will take appropriate steps against excessive volatility," Suzuki said.
The dollar briefly spiked to a 32-year high above 147.64 yen on Thursday and was trading in the lower 147 yen zone immediately after the press conference, also attended by Bank of Japan Governor Haruhiko Kuroda.
Kuroda stressed the need to maintain the Japanese central bank's ultralow rate policy, drawing a sharp contrast with the United States and Europe where inflation has been accelerating at a much faster pace. The BOJ chief again ruled out the possibility of a near-term rate hike.
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Japan's first yen-buying, dollar-selling intervention on Sept. 22 has so far failed to reverse the broad trend of yen weakness.
The BOJ's persistently dovish stance has been blamed for the Japanese currency's rapid depreciation, which has begun to inflict pain on consumers as it inflates the prices of imported energy, raw materials and food.
Japan's core consumer inflation, excluding volatile fresh food, recently rose 2.8 percent but will likely slow in the next fiscal year, Kuroda said, justifying the BOJ's swimming against the global tide of monetary tightening.
"Japan's economy has emerged from the COVID-19 fallout, with a recovery seen in consumption and business investment. But the pace of recovery is still slower than in countries like the United States so we need to support the recovery," Kuroda told the press conference.
"It's not that we cannot raise interest rates," Kuroda said. "If we think about the most appropriate monetary policy and interest rate levels based on the economic and price situations, it's neither necessary nor appropriate to increase interest rates now," the BOJ chief said.
