Japan policymakers jawbone markets as yen falls beyond key threshold

TOKYO, Oct 26 (Reuters) – Japanese policymakers said on Thursday after the currency fell again above 150 yen to the dollar, a level that traders consider a threshold for authorities to intervene. On Thursday, it maintained its warning to investors not to sell the yen.

Deputy Chief Cabinet Secretary Hideki Murai responded to a question about the weak yen at a regular press conference, saying, “It is important that the exchange rate remains stable and reflects fundamentals. Excessive fluctuations are not desirable.” He declined to comment on whether Japan would intervene in the currency market.

Finance Minister Shunichi Suzuki also told reporters early Thursday that authorities were watching the market “with a sense of urgency,” but did not comment on intervention.

The Japanese yen fell to a one-year low of 150.50 yen to the dollar on Thursday, far behind the 151.94 yen it hit in October last year, when Japan intervened in the currency market.

The weaker yen has recently become a sore point for Japanese policymakers, as it boosts exporters’ profits but also raises the cost of importing raw materials and household living costs.

Thursday’s comments used softer language than is typically used before the intervention.

Authorities tend to increase warnings when currency intervention is imminent, and said they were prepared to take “decisive action” and would not rule out any options.

The weakening of the yen due to the difference in Japanese and U.S. interest rates is likely to continue to pressure the Bank of Japan to revise its policy of capping long-term yields near zero.

Sources told Reuters that a possible increase in the existing yield cap, which was set just three months ago, is being discussed ahead of next week’s policy meeting.

The benchmark 10-year Japanese government bond (JGB) yield rose to 0.885% on Thursday, the highest since July 2013, on rising global yields and expectations for a near-term policy shift from the Bank of Japan. level, approaching the Bank of Japan’s upper limit of 1.0%.

Japan’s core inflation rate reached 2.8% in September, exceeding the Bank of Japan’s 2% target for 18 consecutive months, raising expectations that the central bank will soon end negative short-term interest rates and yield curve control (YCC) policies. It has increased.

Bank of Japan Governor Kazuo Ueda has emphasized the need to keep monetary policy ultra-easy until the current cost-driven price increases give way to more durable demand-driven inflation.

With wages not rising fast enough to outpace inflation, the government plans to put together a package of measures, including around $33 billion in benefits and income tax cuts, to cushion the blow to household budgets from rising living costs.

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