Japan’s finance minister issues most explicit warning yet of falling yen and economic fallout

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Japan’s Finance Minister Shunichi Suzuki prepares to ring a bell during the New Year ceremony marking the opening of trading in 2022 on the Tokyo Stock Exchange (TSE), amid the coronavirus disease (COVID-19) pandemic ), in Tokyo, Japan on January 4, 2022. REUTERS/Issei Kato

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  • Yen above 127 per dollar despite verbal warning from policymakers
  • Finmin Suzuki stresses the need for monetary stability
  • Decline to comment on policy options, including foreign exchange intervention

TOKYO, April 19 (Reuters) – Japan’s Finance Minister Shunichi Suzuki said on Tuesday that the damage to the economy from the weakening yen currently outweighs the benefits from it, warning the most explicit to date against the currency’s recent fall against the dollar. .

The fall in the yen added to imported inflationary pressures in Japan amid soaring global commodity and oil prices and increasing supply problems, which intensified in the wake of the Ukraine crisis.

“Stability is important and sudden currency movements are undesirable,” Suzuki told parliament, repeating previous comments as the Japanese currency weakened to new 20-year lows against the dollar.

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“A weak yen has its merits, but its downside is greater in the current situation where crude oil and raw material costs are rising globally, while a weak yen is driving up import prices, hurting consumers and businesses unable to pass on costs,” Suzuki said. .

Taken together, the minister’s comments marked the clearest signal of the Japanese authorities’ discomfort with the continued decline of the yen.

Suzuki declined to comment on how the government and the Bank of Japan should respond to the weakening yen, including whether market intervention is an option.

His remarks came ahead of his trip to Washington to attend a gathering of financial leaders from the major Group of 20 (G20) economies this week. Among the many discussions, the minister is also due to have a meeting with US Treasury Secretary Janet Yellen.

Suzuki pledged to abide by the Group of Seven (G7) currency agreement and to communicate closely with monetary authorities in the United States and other countries to “respond appropriately” to currency movements.

The currency market shrugged off the minister’s verbal profanity, sending the yen to 127.80 to the dollar, its lowest level since May 2002. The yen has lost around 10% against the dollar so far this year.

Investors say verbal warnings won’t have much of an impact as yen weakness mirrors fundamentals, noting contrasting prospects of an aggressive Federal Reserve tightening streak with that of the Bank of Japan’s commitment to maintain its powerful monetary easing plan.

The fundamental position of the G7 is that exchange rates are set by the market and that members will consult closely on any action in the foreign exchange market. The group further recognizes that excessive volatility and disorderly movements can harm economic and financial stability.

Japanese authorities were carefully monitoring the impact of the weaker yen on the economy, as stability in the currency market is important, Suzuki added.

An April 1-11 survey of 5,400 Japanese companies by private credit research firm Tokyo Shoko Research showed that around 40% had been negatively impacted by a weak yen, the assumed dollar/ yen being as low as 110 yen among listed manufacturers.

The previous poll in December, when the dollar was hovering around 113 yen, found that only around 30% of Japanese businesses viewed a weak yen as negative, underscoring how the rapid depreciation since the start of this year is hitting businesses.

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Reporting by Tetsushi Kajimoto Editing by Shri Navaratnam and Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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