Former Bank of Japan Governor Haruhiko Kuroda stated on Wednesday that while Japan's recent currency market intervention may have prevented the yen from breaking below the 160 level against the U.S. dollar, it is unlikely to have a lasting impact in supporting the Japanese currency.
Speaking at a seminar, Kuroda noted that foreign exchange interventions typically produce long-term effects only when they inflict significant losses on speculators or are forceful enough to shift market sentiment.
"The Japanese authorities took decisive action this time against excessive yen depreciation. However, it is difficult to expect this measure to have a lasting effect on the yen," said Kuroda, who served as a senior finance ministry official overseeing Japan's exchange rate policy before becoming central bank governor.
"This recent round of intervention did play a role in preventing the yen from falling below 160 against the dollar, which would have led to further declines," he added. "But the impact of intervention generally does not last very long."
Informed sources told Reuters that Japan spent nearly 10 trillion yen in the intervention that began on April 30, marking the country's first official foreign exchange market intervention in nearly two years.
"Based on Japan's economic fundamentals, I believe the equilibrium level for the dollar-yen exchange rate is around 120 to 130," Kuroda said during the seminar. The dollar was trading around 157.80 yen on Wednesday.
Kuroda attributed the recent trend of yen weakness primarily to rising oil import costs since the outbreak of the Ukraine war in February 2022, as well as the interest rate divergence between Japan and the United States.
Comments