Stable currency is vital, says Japan Finance Minister, as yen descends to 3-year low

TOKYO (Reuters) -Currency stability is “very important” and Japan’s government will scrutinise the economic impact from the yen’s recent decline, Finance Minister Shunichi Suzuki said on Friday.

FILE PHOTO: Japan’s new Finance Minister Shunichi Suzuki wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, speaks at a news conference in Tokyo, Japan, October 5, 2021. REUTERS/Kim Kyung-Hoon

The dollar rose to a near-three-year high against the yen at 113.885 yen on Friday before the minister’s comments, partly on expectations inflation risks could prod the U.S. Federal Reserve to raise interest rates sooner than expected. It remained near that level in early afternoon trading.

“Stability in currencies is very important,” Suzuki told a news conference. “We will continue to closely watch currency market moves and their impact on the economy.”

While a weak yen pushes up import costs for some firms and consumers, it helps exporters, he said.

Japan’s wholesale inflation hit a 13-year high in September as rising global commodity prices and a weak yen pushed up import costs, putting pressure on corporate margins and raising the risk of unwanted consumer price hikes.

“I was a bit surprised at the minister’s remark, which gave an impression that he was concerned about a weak yen,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

“He probably wanted to signal a message that a weak yen doesn’t make everything rosy as he needed to show a sympathy towards consumers facing higher import costs ahead of elections.”

That said, no one in the market expected the government to respond to the yen moves at this stage via measures such as intervening through yen-buying, he added.

Economy Minister Daishiro Yamagiwa said “there’s no doubt” that a weak yen would affect resource-deficient Japan’s economy as it drives up the cost of energy.

He declined to comment further, saying that commenting on currencies in his capacity could “cause problems”.

Source: Read Full Article