FINANCE MINISTRY’S RESPONSE TO SHARP FX MOVES STILL UNDER CONSIDERATION

In a statement that essentially opened the door for a move higher in USD/JPY, the Japanese Finance Minister Suzuki mentioned that..

“the timing and financing sources for swift comprehensive measures to cope with price hikes have not yet been decided”.   

Mr Suzuki’s comments add to a string of prior statements issued on behalf of the ministry of finance as well as the Bank of Japan (BoJ), in disapproval of the sharp depreciation of the yen. 

Prior to last week, the BoJ Governor Kuroda leaned slightly in favor of the yen depreciation as it boosted company profits for firms repatriating foreign income. 

However, last week Monday the Governor made a U-turn, stating that, “the yen’s recent sharp declines are negative for Japan’s economy and therefor undesirable”. 

As dissenting voices gather, it would be reasonable to assume that USD/JPY would find stern resistance to its impressive bull run but that has not transpired.  

Today, USD/JPY reached a new 24 year high, trumping the prior high of around 135.60. However, warnings from Tokyo and the BoJ regarding yen weakness should not be discounted..

especially at a time when it appears that the BoJ will be the last of the ultra-dovish (major) central banks to hike rates – if a rate hike is indeed in the works.  

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