Japan intervenes to prop up the yen for first time in 24 years

TOKYO – Japan announced Thursday that it had intervened to prop up the value of the yen for the first time in 24 years, seeking to stanch the currency’s continuing slide against the US dollar.

The yen has lost more than 20 per cent of its value against the dollar over the past year, pressuring Japan’s economy by making it more expensive to import many essentials, including energy and food. The yen’s plunge has been caused largely by Japan’s determination to keep interest rates low even as the United States Federal Reserve cranks them up to fight inflation, pushing the dollar higher.

The yen passed 145 to the dollar Thursday, a day after the Fed announced that it would raise its policy rate an additional three-quarters of a percentage point, to a range of 3 per cent to 3.25 per cent.

It was the lowest value for the yen in 24 years and an important psychological threshold that pushed the government to sell dollars in an effort to stop a further slide. The yen’s performance this year has been the worst among currencies of the major developed economies.

The Japanese finance minister, Shunichi Suzuki, said at a news briefing on Thursday that the government had “been concerned about the rapid one-way movement” of the currency, adding that it “absolutely can’t overlook excess volatility arising from speculative behavior.”

Following the government’s dollar-selling operation Thursday, the yen briefly jumped to just below 141 before dropping again.

Mr Suzuki said the government would not disclose details of the size or timing of the intervention.

Japan has been warning in recent months that it could intervene if necessary, hoping that alone would stem the yen’s decline.

Now government officials are “prepared to take action 24 hours a day, 365 days a year,” Masato Kanda, a vice finance minister, told reporters after the announcement.

In an earlier era, a weak yen was widely seen as a boon for Japan’s export-driven economy, making its products cheaper and more attractive for consumers abroad and driving up the value of its foreign earnings.

As the economy globalised, however, and many manufacturers moved production offshore, the benefits have become less straightforward. The yen’s weakening has been especially problematic because the pandemic and the war in Ukraine have driven up the cost of a wide range of imports.

That has caused consternation at home, where prices have begun posting significant rises for the first time in years, as long as three decades for some products.

The Japanese government’s intervention on Thursday followed an announcement by the Bank of Japan that it would stick fast to its long-standing ultralow interest rate policy even as most other countries have begun to follow the Fed’s increases. Switzerland on Thursday put an end to an era of negative interest rates in Europe.