Market: Japan to intervene if yen falls to 145 to the dollar, economists say

by Satoshi Sugiyama

TOKYO (Reuters) – Japan’s government and central bank will intervene to stem the yen’s depreciation if it falls to 145 against the dollar, more than half of economists polled by Reuters said.

Since last month’s meeting of Japanese authorities, following a further fall in the yen to near a six-month low, market participants have been closely watching the reactions of Tokyo and the Bank of Japan (BoJ) to foreign exchange, as the issuing institution is set to issue its monetary policy decision on Friday .

The Reuters poll of economists, conducted from June 8 to 13, shows that 96% of them expect the BoJ to leave its ultra-accommodative monetary policy unchanged on Friday. On the other hand, about half of the respondents expect an adjustment of the latter in July or September, in particular a change to the yield curve control (YCC) policy.

Fifteen out of 28 economists, or 54%, said the government and BoJ would intervene, including a warning or even outright intervention in the currency market, if the yen falls against the dollar beyond 145. Twelve economists see this $150 threshold for a Yen.

“Domestic companies’ tolerance for a weak yen has improved on the back of strong tourism demand, but a sharp fall in the yen would hurt the manufacturing sector as weak demand from overseas took away the benefit of the yen’s depreciation,” Harumi Taguchi said. economist at S&P Global Market Intelligence.

Analysts said BoJ officials could intervene if the yen weakens rapidly or if there are fears its depreciation will fuel inflation and erode household purchasing power.

In response to a separate question about the impact of yen weakness on BoJ policy, nine economists (31%) said central bank decisions could be affected by a depreciation of the yen beyond 145 to the dollar. Ten said 150 was the trigger point, three chose 155 and two rated it at 160 or more.

The BoJ, the Treasury and the Financial Services Agency (FSA) held a tripartite meeting on May 30, similar to last year, which then led to currency market action in September consisting of selling dollars and buying yen. , the first intervention of this type by the archipelago’s authorities in 24 years.

The yen hit a 32-year low in October, near 152 to the dollar, before recovering as the government took further measures and the BoJ surprised the market with a December change in the YCC. On Thursday, the Japanese currency traded at 141.25 yen per dollar.


Of the 28 economists polled by Reuters, 27 said the BoJ, which has been meeting since Thursday, should maintain its highly accommodative monetary policy, confirming information reported by sources close to the central bank.

Almost two-thirds of respondents nevertheless predicted that the BoJ would revise its monetary policy this year. In last month’s survey, 71% believed such a change would take place. The share of economists (about 43%) predicting a change in July was largely unchanged.

“July may be the best time to change the YCC as it coincides with the publication of the BoJ’s quarterly inflation forecast and ahead of a likely US recession expected this year,” Sony Financial Group economist Hiroshi Watanabe said.

He said he expected the volatility cap on Japanese 10-year bond yields, currently set at 0.5%, to be raised to 1.0%.

Separately, more than 70% of economists surveyed said that wage growth in Japan in 2024 is likely to remain at a sufficient level for the BoJ to consider ending the YCC or changing it.

Amid labor shortages, companies in Japan, eager to retain or attract new talent, have proposed wage increases this year of more than 3%, a level not seen in 30 years.

BoJ Governor Kazuo Ueda, who last week said he saw changes in corporate behavior, stressed that an end to the bank’s ultra-accommodative policy would depend on the economy’s ability to achieve a sustained recovery.2% inflation coupled with wage growth.

(Reporting by Satoshi Sugiyama; with KantaroKomiya; reporting by Veronica Khongwir and Anant Chandak; French version by Claude Chendjou; editing by Kate Entringer)

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