Shindo, Japan's Finance Minister, Warns of High Volatility in the Forex Market

On May 7, Japanese Finance Minister Masato Kanda expressed concerns about the recent high volatility in the foreign exchange market. He warned that "if the exchange rate fluctuates excessively beyond the economic fundamentals due to speculation and other reasons, the government must take appropriate action." This statement is interpreted as being aimed at the recent sharp fluctuations in the yen's value.

Image Source: GPT4.0

Following the sharp decline in the yen's value on April 29 and May 2, speculation arose that the Japanese government and central bank had intervened in the foreign exchange market. Unlike the intervention in September 2022, which marked the first yen-buying intervention in 24 years and was publicly disclosed, the government has not officially confirmed whether it intervened this time.

Finance Minister Kanda stated, "Generally, exchange rates should move steadily, reflecting the fundamental conditions of the economy." He added, "If the market functions soundly, there is no need for government intervention." However, he also emphasized that "if the market moves disorderly, the government must respond appropriately."

At the ASEAN+3 Finance Ministers' Meeting held in Tbilisi, Georgia last week, it was pointed out that "many countries have expressed serious concerns about the current exchange rates and other factors," indicating that this situation is not unique to Japan.

Amidst the ongoing rapid depreciation of the yen, Japan is also closely monitoring the possibility of an early interest rate hike in the United States. While stating that "it is not appropriate to comment on monetary policy," Finance Minister Kanda said that Japan is "in close communication with central banks in various countries, including the Bank of Japan."

The Japanese government is concerned about the potential negative consequences of the continuous weakening of the yen, such as rising inflationary pressures and a widening trade deficit. Therefore, it is signaling that it will actively intervene in the market if necessary. Experts anticipate that Japan will seek ways to stabilize exchange rates through close cooperation with major countries such as the United States.