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

TOKYO - Japan announced on 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 on Thursday, a day after the Fed announced that it would raise its policy rate by 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 the currencies of major developed economies.

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 cannot overlook excess volatility arising from speculative behaviour".

Following the government's dollar-selling operation on 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", Vice-Minister of Finance for International Affairs Masato Kanda 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 as 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.

This 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 (BOJ) that it would stick fast to its longstanding ultra-low 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.

Low interest rates have been a crucial part of Japan's economic policy for almost a decade, introduced in an effort to push up the country's low inflation by making money cheaper and more readily available. In small quantities, inflation is supposed to have a salubrious effect on economic growth by increasing corporate profits and workers' wages.

While inflation in Japan has gone up during the pandemic, it remains well below the levels seen in other countries - 2.8 per cent in August. Also, BOJ officials believe that it is the wrong kind of inflation, created by pandemic-related supply constraints instead of the consumer-driven demand that low interest rates were intended to stoke.

Japan previously intervened to strengthen the yen during the Asian financial crisis in 1998 when the currency was trading at around 146 to the dollar. It tried to weaken the currency in 2011. NYTIMES