By Leika Kihara TOKYO (Reuters) - Japanese authorities are facing renewed pressure to combat a sustained depreciation in the yen, as investors eye ...
Church Brewing: where the customers are the congregation and the choir | SaltWireTOKYO - Japanese authorities are facing renewed pressure to combat a sustained depreciation in the yen, as investors eye prospects of higher-for-longer U.S. interest rates while the Bank of Japan remains wedded to its super low interest rate policy.
But yen weakness is now seen as problematic, with Japanese firms having shifted production overseas and the economy heavily reliant on imports for goods ranging from fuel and raw materials to machinery parts.When Japanese authorities escalate their verbal warnings to say they"stand ready to act decisively" against speculative moves, that is a sign intervention may be imminent.
The dollar is already within striking distance of the 150-yen level seen by markets as authorities' line in the sand. If that line breaks, many market players see 151.94 yen, where Japan last intervened, as the next threshold, then 155.The decision is highly political. When public anger over the weak yen and a subsequent rise in the cost of living is high, that puts pressure on the administration to respond. This was the case when Tokyo intervened last year.
The decision would not be easy. Intervention is costly and could easily fail, given that even a large burst of yen buying would pale next to the $7.5 trillion that change hands daily in the foreign exchange market.When Japan intervenes to stem yen rises, the Ministry of Finance issues short-term bills, raising yen it then sells to weaken the Japanese currency.
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