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Following a meeting with his South Korean counterpart Choi Sang-mok on Tuesday, Japanese Finance Minister Shunichi Suzuki said that they “will continue to take appropriate steps to respond to the declining value of the currency.” Additional comments Japan, South Korea share serious concerns on respective currency depreciation. Will closely monitor currency movements. Market reaction The Japanese Yen is holding the recovery gains following these intervention warnings, with USD/JPY losing 0.08% on the day to trade at around 159.45, as of writing. Japanese Yen FAQs The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors. One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen. The Japanese Yen is often seen as a safe-haven…

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Filed under: News - @ June 25, 2024 10:12 am