Gao Zhanjun's Column: Why is Japan's Ministry of Finance Hesitant to Intervene in the Forex Market? (AI Translation)
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文｜高占军
By Gao Zhanjun
4月29日星期一，亚洲汇市盘中，一段时间以来备受关注的日元汇率再度出现大幅异动：日元兑美元一度跌破160日元的关键点位至160.17日元，之后又强劲反弹升至154.54日元。
On Monday, April 29, during mid-session trading in the Asian currency markets, the Japanese yen, which has been closely watched for some time, experienced another significant fluctuation: the yen briefly fell below a key level to 160.17 against the US dollar before making a strong rebound to 154.54 yen.
日内最大波幅竟然高达5.63日元，这对从来“不甘寂寞”的日元汇率而言，也是极为罕见的。何况160日元创下了1986年以来的新低，更是一个重要的心理防线，所以急跌之后的显著反弹，引发对日本金融当局是否已入市干预的种种猜想。《华尔街日报》在随后的报道中，就十分肯定地认为确实有官方干预。当然，这是很难证实的，因日本财务省未予承认，而官方汇市操作的数据通常是在一个月后才公布。
The Japanese yen experienced an unusually high intraday volatility, with fluctuations reaching as much as 5.63 yen. This level of activity is rare for the typically dynamic yen exchange rate. Moreover, the drop to 160 yen marked a new low since 1986, breaching a significant psychological barrier. Consequently, the sharp decline followed by a notable rebound sparked speculation about potential intervention by Japanese financial authorities in the currency market. The Wall Street Journal later reported with considerable certainty that there had indeed been official intervention, although this is difficult to confirm as Japan's Ministry of Finance did not acknowledge any involvement. Typically, data on official market operations are only published one month after the fact.
无论是否已出手，日本财务省有很强的入市干预动机，这是毫无疑问的。相当一段时间以来，面对日元汇率难以遏制的贬值，日本财务省主要官员就曾多次表示，虽然日元贬值有利有弊，但投机驱动的汇率过度波动对经济不利，所以需要时刻关注外汇市场，并在必要时采取相应措施。
There is no doubt that the Japanese Ministry of Finance has a strong motivation to intervene in the market, whether or not it has already acted. For quite some time, facing the uncontrollable depreciation of the yen, senior officials at the Ministry have repeatedly stated that although there are pros and cons to the yen's depreciation, excessive volatility in exchange rates driven by speculation is detrimental to the economy. Therefore, it is essential to closely monitor the foreign exchange market and take appropriate measures when necessary.
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- On April 29, the Japanese yen experienced a significant fluctuation against the US dollar, dropping to a new low since 1986 at 160.17 yen before rebounding strongly to 154.54 yen, marking an unusual intraday swing of 5.63 yen.
- Speculations arose about potential intervention by Japanese financial authorities in the currency market, especially after such a sharp recovery from a critical psychological threshold; however, Japan's Ministry of Finance did not confirm any intervention.
- Despite repeated statements from Japan's Ministry of Finance about intervening if necessary due to the adverse effects of speculative-driven excessive volatility on the economy, there is caution regarding the timing and support from the Bank of Japan, which has been less enthusiastic about stabilizing the yen due to its potential economic benefits.
On April 29, the Japanese yen experienced a significant drop during mid-session trading in the Asian currency markets, briefly falling to 160.17 against the US dollar before rebounding to 154.54 yen [para. 1]. This marked a new low since 1986 and represented an unusually high intraday volatility of up to 5.63 yen [para. 1]. The sharp fluctuation led to speculation about potential intervention by Japanese financial authorities, although Japan's Ministry of Finance did not confirm any involvement [para. 1].
The Ministry of Finance has expressed concerns over the depreciation of the yen and its impact on the economy, emphasizing that excessive volatility driven by speculation is harmful [para. 2]. Despite not confirming intervention on April 29, there is strong motivation within the ministry to stabilize the currency market when necessary [para. 2].
In preparation for potential interventions, Japan's Ministry of Finance has been actively engaged in diplomatic efforts. Statements from international meetings like the G20 and G7 have supported actions against excessive volatility in exchange rates [para. 3]. Additionally, a trilateral meeting between finance ministers from the U.S., Japan, and South Korea acknowledged concerns over significant declines in their currencies [para. 3].
The continuous weakening of the yen has prompted public calls for intervention as it affects small and medium-sized enterprises through higher costs for imported materials and impacts households by reducing real wage growth despite nominal increases [para. 4]. Inflation-adjusted wages fell by 2.5% in 2023, leading to a decline in consumer spending for the first time in three years [para. 4].
While there is international support for intervening in currency markets under certain conditions, coordination with the Bank of Japan is crucial but challenging due to differing views on monetary policy [para. 5][para. 6]. The Bank of Japan maintains a focus on stimulating demand through a weaker yen without significantly contributing to inflationary pressures, which contrasts with the Ministry of Finance’s priority on exchange rate stability [para. 6].
Despite these challenges, thresholds set by Japan's Ministry of Finance for intervening include specific target rates and criteria based on rapid fluctuations; these thresholds have been met recently due to ongoing depreciation of the yen [para. 7]. However, cooperation from the Bank of Japan remains essential yet difficult to achieve as it continues its loose monetary policy stance without indicating changes to government bond purchases or interest rates [para. 6][para. 7].
Overall, while both domestic factors and international dynamics influence decisions regarding currency interventions, achieving effective stabilization requires careful timing and coordination among various governmental bodies including central banks.
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