Japan Jumps Into Market to Buy Yen for First Time in 24 Years; Currency Rallies

TOKYO—Japan intervened in the foreign exchange market by buying yen for the first time in 24 years, shortly after the

Bank of Japan

accelerated a fall in the currency by confirming it would maintain ultralow interest rates.

The rare intervention was the latest example of global concern triggered by the strong dollar, which has gained ground on the back of the Federal Reserve’s interest-rate increases.

One nation hit by the fallout is Japan, the world’s third-largest economy, which has to pay more for essential imports of oil, natural gas and food. These imports are generally denominated in dollars and now are costing more in yen terms.

The dollar rose near 146 yen after Bank of Japan Gov.

Haruhiko Kuroda

hinted Thursday afternoon that interest rates in the country were likely to stay near zero for the next couple of years.

Less than an hour after Mr. Kuroda stopped talking, the government stepped in. It said it intervened in the market to sell dollars and buy yen—the first such operation since 1998.

The move resulted in an initial success. Within minutes, the yen rose so that it took only around 141 yen to buy a dollar. Still, that is far below a level set earlier this year when the dollar was trading at around 115 yen. As of Thursday evening Tokyo time, the yen was trading at around 142.65 yen to the dollar.

The core cause of the dollar’s strength, particularly against the yen, is the interest-rate differential between the U.S. and Japan, traders have said.

On Wednesday, the Fed raised interest rates by three quarters of a percentage point and signaled additional large increases to come. A half-day later in Japan on Thursday, the central bank decided to maintain short-term interest rates at minus 0.1% and its target for the 10-year Japanese government bond yield at around zero.

Mr. Kuroda said the bank had no plan to raise interest rates and repeated the bank’s guidance that it would maintain easy monetary policy for the time being, which he defined as two to three years. The reason, he said, was that he didn’t see Japan’s inflation—which hit 3% in August—as likely to last.

“It is almost certain that the pace of price increases will fall below 2% next fiscal year and beyond,” Mr. Kuroda said at a news conference on Thursday. The next fiscal year in Japan begins in April 2023. Inflation in Japan is much milder than in the U.S., where prices have been rising at a pace exceeding 8%.

Mr. Kuroda said the yen’s recent fall is “one-sided and affected by speculative trading” but reiterated that the bank would continue monetary easing because he said the nation’s economy was still recovering from the Covid-19 pandemic.

In recent months, traders have generally brushed off statements by Japanese officials expressing concern about the yen’s fall, assuming Tokyo wasn’t ready to put its money where its mouth was. That could change now, analysts said.

“Speculative traders may become more cautious over verbal intervention, thinking that any comments by the finance minister could mean something,” said

Mitsubishi UFJ Morgan Stanley Securities

strategist Naomi Muguruma.

“But the effects could be temporary as long as fundamental factors behind a weak yen remain, such as Japan’s trade deficit and an interest-rate gap between Japan and abroad,” Ms. Muguruma said.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

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