Japan’s Kanda says he is ready to take necessary measures in the face of the rapid fall of the yen
Kanda, Deputy Minister of Finance in charge of International Affairs of the Japanese Ministry of Finance. It is he who will order the BOJ to intervene when it deems it necessary. Often referred to as Japan’s “greatest currency diplomat.”
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Recent yen movements are rapid
- Does not exclude any measures to respond to disorderly exchange rate movements
- Ready to take necessary action wherever possible
- I won’t say whether overnight currency movements are excessive
- Excessive currency movements could affect the economy
I warned that we would receive some sooner:
My warning didn’t require much imagination. After several major USD/JPY numbers rose overnight, this was a no-brainer. Be on the lookout for more to come, at least from Finance Minister Suzuki and Japanese Chief Cabinet Secretary Matsuno.
These comments are a step up from the usual comments we receive and, as such, represent an escalation of rhetoric. However, they are still below what we are likely to see before actual intervention.
Check out this to learn more about what to look out for:
USD/JPY is barely moving lower. There are many offers, still insufficient to cover those who were waiting for an intervention:
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A note on the mechanics of the intervention:
- The Ministry of Finance (MOF) of Japan is responsible for formulating the country’s foreign exchange policy, while the Bank of Japan (BOJ) is responsible for executing these policies, particularly in terms of foreign exchange intervention. exchange.
- The MOF can decide to intervene in the foreign exchange market if it considers (in the current situation) that the yen is too weak. Once the MOF decides to intervene, it issues instructions to the BOJ. The BOJ then conducts operations in the foreign exchange market by purchasing (under current circumstances) yen. The special account of the Foreign Exchange Fund (FEFSA), which falls under the jurisdiction of the MOF, is used for interventions. You will notice that in the current situation, where the BOJ would buy yen, it would draw on US dollar reserves to finance the other side of the transaction, buying US dollars (or other currencies if necessary).
- The BOJ’s operations are generally conducted through commercial banks that trade in the foreign exchange market. These may be spot transactions or futures transactions that are expected to take place at a later date. It should be noted that while the Finance Ministry has the ultimate authority to decide when to intervene, it does so in close consultation with the BOJ. The BOJ provides expertise and advice on currency and financial market conditions, which may influence the MOF’s decision. This collaboration reflects the balance between the roles of the two entities: the MOF as the government’s main financial and economic advisor, and the BOJ as the country’s central bank that maintains the stability of the financial system.
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